Part A: Global Witness Research and Investigations in 2006-09 / 6 The Burma-China Timber Trade

6.2 Timber import procedures, theory from the Chinese Ministry of Commerce. According to and practice Chinese law (see ‘A Choice for China’, pages 23-24), Chinese Customs and the AQSIQ require that all 6.2.1 The procedure in Burma timber imports are accompanied by a valid certificate, issued by the competent authorities in the country of According to the Planning and Statistics Department origin, stating the country of origin. A valid quarantine of the Ministry of Forestry, the following certificate from the country of origin is also required. steps must be followed in order to obtain permission However, none of the hundreds of people involved in to import timber through the land border to China: the trade along the China-Burma border (including customs officials), interviewed by Global Witness, 1. Companies need to receive permission to claim to have heard about such certificates.321 purchase timber, and make a sales contract, from According to people interviewed on the border, the Ministry of Forestry. international trade can be classified as either ‘damao’ 2. To obtain a border pass, permission from the (country to country trade), frontier trade (trade on a Defence Services (Army) and Trade Council must small scale between residents on both sides of the be received. border) or border area trade with, “characteristics of the 3. It is necessary to apply for an export permit from region, ethnicity, and tradition”. The cross-border the Department of Border Trade. timber (and minerals) trade with Burma is treated as 4. An inspection team must be formed under the frontier trade and, as such, is not subject to the same authority of the commander of the border area documentary requirements as ‘damao’. command comprising the Customs Department, Upon arrival of the timber at the border, customs the Department of Immigration and Manpower, should check that the company has the valid paperwork the Department of Border Trade, the Department from Ministry of Commerce. Customs should then issue of Forestry, and the district SPDC. import permits for the appropriate amount of timber, 5. Necessary work for exporting across the border after payment of the required tax. The AQSIQ issues a must be carried out under supervision of the Quality Supervision Inspection and Quarantine Inspection Team.8 certificate following spot-checks on the goods. The SFA verifies the timber as non-domestic, taxes it, and issues 6.2.2 The procedure in China

The following Chinese government agencies are all involved, in theory, with clearing Burmese timber for importation and its onward transportation in China: Chinese Customs, the Administration of Quality Supervision Inspection and Quarantine (AQSIQ), the Ministry of Commerce, the State Administration (SFA) and the Border Defence Brigade. All Chinese companies involved in international trade must acquire a permit to trade in foreign goods Official timber import procedure, Car Zan, China; 2009

Official timber import procedure, Nabang, China; 2007

A DISHARMONIOUS TRADE 16 Part A: Global Witness Research and Investigations in China 2006-09 / 6 The Burma-China Timber Trade

legal requirements and many are completely unaware of the relevant procedures. As a result they are not implemented uniformly by the different Chinese government agencies overseeing the timber trade along the China-Burma border. Despite significant improvements, timber is still allowed to cross the border illegally in many places. Much of the initial confusion seems to have derived from a distinction between ‘border-to- border’ trade and ‘country-to-country’ trade. Many local officials, enforcement agencies, and traders alike have viewed the cross-border timber trade between Burma and China as ‘border-to-border’ trade. This is normally a category used for small-scale trade conducted by locals and, therefore, apparently not subject to the normal (‘country-to-country’ trade) customs and import clearance procedures.46 The Border Defence Brigade is tasked with ensuring security along the border, controlling border checkpoints,c1 and investigating crimes related to the timber trade, such as smuggling and corruption. It is not clear in all instances why it does not stop the smuggling. However, in some places it is not considered to be their responsibility. The work of the Timber transportation certificate, Dehong Prefecture; December 2006 brigade is complicated by the fact that several (mainly the required transportation certificate. This allows for an unofficial) border crossings do not have permanent exact, recorded, amount of timber to be transported units stationed there. In other places, the brigade’s within the prefecture or province. Transportation checkpoints are several kilometres from the border. beyond the provincial boundary is normally cleared in This allows traders to move timber into China and to . These documents must all be shown upon store it between the border and the checkpoint. request to the officials from the Border Defence Brigade, In some instances, timber has ended up as ‘dead which has several toll gates along the major highway stock’, stuck in the border towns, without any from the border to Kunming.44 immediate prospect of it being cleared. Many The 11 May 2006 Interim Measures added further companies, faced with this predicament, have used hurdles for the would-be timber importer to pass. old certificates and certificates for domestic timber, Prior to this, timber could, for example, be imported smuggled the timber and otherwise tried to avoid into the area and transported out of Dehong detection (see ‘6.3 Snake business’, opposite). Prefecture accompanied solely by certificates easily Patchy implementation of the moratorium and obtainable from the SFA. Now, customs certificates Interim Measures reflects, in part, the difficulty are also required, if they can be obtained at all.45 It is experienced by provincial and central government the issuing of customs, QSIQ, and SFA certificates authorities in realising policy at a local level, often in that has been stopped in many border towns remote areas, as expressed in a well-known Chinese following the March 2006 suspension order and later saying: “The sky is high and the emperor is far Interim Measures. Without the appropriate away.” The companies, often with the support of documentation the timber cannot be legally imported local officials reliant on the timber industry for much into China or transported further inland. of their income, try continually to evade the It is essential to define clearly and communicate provincial enforcement agencies. the procedures and documentary requirements for It should be noted that while the violations are importing Burmese timber into China to the relevant widespread, overall timber imports are still significantly authorities and timber traders. The Interim lower than before. It should also be stressed that Measures, at least, are available on the despite reports of corruption and negligent behaviour Province government website. However, it is not of some local officials and enforcement agencies, clear to timber traders and officials on the border import procedures and enforcement have improved how exactly the Interim Measures interact with other dramatically since May 2006. c1 In a few places, such as Tse Tse, the People’s Liberation Army is stationed near the border and controls the checkpoints.

17 A DISHARMONIOUS TRADE Part A: Global Witness Research and Investigations in China 2006-09 / 6 The Burma-China Timber Trade

6.3 Snake business: getting around the ban 6.3.1 Bribery and corruption and new timber importation rules “Don’t worry about proper procedures. We can arrange it 48 “The closure does not matter to us. There is always a way to all for you. If you bring money, then business is simple.” solve a problem naturally.” Employee at leading timber processing Timber businessman, Sudien, Dehong Prefecture, Yunnan Province, company in Ruili, Dehong Prefecture, April 2006 May 2006

Smuggling and other scams to transport timber Many timber traders have suggested to Global across the China-Burma border, and further inland, Witness that bribery has played a role in getting local are often elaborate, but most are easy to detect. officials and enforcement agencies to look the other Such schemes have developed rapidly since the way, or as one businessman put it, “Money makes imposition of the moratorium and the publication things go smoothly and the timber business makes of the Interim Measures. Prior to this the smuggling money.”49 These allegations were widespread but of timber was not widespread as it could be rarely concrete in terms of naming individuals or imported from Burma unhindered by the specific government offices. Most commonly, traders authorities. alluded to the fact that despite the moratorium and Transporting timber via roads without official new rules they could still get timber through checkpoints, and at night, are the most prevalent checkpoints, and obtain the relevant permits, upon methods of smuggling timber across the China- payment of a higher ‘fee’. Global Witness could not Burma border. According to one Kachin timber verify these allegations which were most persistent in trader, if you can show an export licence from the County, Baoshan Prefecture, and in the Burmese authorities you can get through on the Yingjiang area of Dehong Prefecture. China side, but the Chinese, “don’t check strictly if it Local people spoken to by Global Witness is correct”. Many use fake export licences.47 These claimed that corruption and ‘guanxi’c2 were the main practices, which traders revealed to Global Witness reasons why night-time timber smuggling was researchers without much hesitation, are an open possible in Guyong, Baoshan Prefecture.9, 67, 68 One secret in many places. The sections below outline the local person told Global Witness, “I am confused if most common ploys. the border is open or not. The customs say it is closed

Logs imported illegally via Datianba (Burma) stored in front of the border gate, Pian Ma, China; January 2007 c2 This means a network of mutually supportive relationships. For further information please see: “Chinese Business Culture – Guanxi and Important Chinese Business Element”, from: http://chinese-school.netfirms.com/guanxi.html

A DISHARMONIOUS TRADE 18 Part A: Global Witness Research and Investigations in China 2006-09 / 6 The Burma-China Timber Trade for importing timber from Burma but trucks loaded tax, customs and AQSIQ fees, 15 % for afforestation with timber show up in town from time to time, and fund etc. But we can now buy it for 480 yuan [US$61] enter the timber storage areas of the companies. The per m3.” 51 It should be noted that the increased price, timber businessmen are still busy with no apparent in this instance, is not necessarily due to bribery but end to the Burmese timber. How much timber you could be the result of people trading permits issued can get in depends on your relationships, on ‘guanxi’, prior to the moratorium, which have not yet expired. and your financial power as well.”9 A log truck driver, en route from Tengchong to 6.3.2 Bypassing official checkpoints the freight railway station in Chuxiong, explained that it was possible to obtain import and “Everybody knows another pass where there is no official checking point, no checking at all - and timber can be transportation permits from the SFA, customs and transported over with no problems.” Timber trader, Dian Tan, 96 other agencies near the border. The permits cost Baoshan Prefecture, January 2007 1,000 yuan (US$129) per cubic meter, much higher than prices quoted by traders elsewhere. The most common way to avoid the restrictions Several timber businessmen in Dian Tan, also in imposed at official border checkpoints, is to bypass Baoshan Prefecture, stressed that they were able to them altogether by using alternative roads with no obtain permits to move the timber within the checkpoints. In several cases, new roads have been borders of Yunnan Province and beyond. This was built and old ones improved by the timber traders, despite the fact that customs and other government following the imposition of the moratorium. Some agencies were not issuing permits at the time, and the these roads and connecting bridges have Border Defence Brigade had started a crackdown on subsequently been destroyed by Chinese border timber smuggling a few days earlier.52 troops. In other places, local enforcement agencies Timber traders in Gudeng, Nujiang Prefecture, have chosen to turn a blind eye. Rumours of told Global Witness that the customs and SFA corruption are rife. bureaus had stopped issuing permits and that logs and Dian Tan, in Baoshan Prefecture, was very busy sawn wood could not be moved out of the area.50 with timber trucks arriving from Burma, at the time This was not however a problem for a sawmill of Global Witness’ visit in January 2007. Dian Tan is manager interviewed by Global Witness who said, “I adjacent to the town of Pangwah, the headquarters of can solve the problem if you pay double or triple an armed ethnic opposition group, the New payment for the legal procedures. We have practised Democratic Army (Kachin) (NDA(K)). Global that several times. For tsuga wood [Chinese hemlock] Witness researchers counted ten trucks, arriving for example, the normal price for taking it out is 180 within a 20 minute period, and were told that more yuan [US$23] per m3. This includes national and local than 300 timber trucks were currently plying the

Log trucks on the Zuklang Road avoiding Pangwah, Burma; April 2006

19 A DISHARMONIOUS TRADE Part A: Global Witness Research and Investigations in China 2006-09 / 6 The Burma-China Timber Trade route from the forest to Dian Tan town through an alongside the valley. Global Witness researchers unofficial border crossing point.52 In town, it was a saw a bulldozer and an excavator making a way for common ‘secret’ that timber was entering in this way the road, which according to a long-term timber with, “no checking at all”.52 trader was being built to facilitate the transfer of Information obtained by Global Witness, in timber into Pian Ma, “without any check by the Kachin State in 2006-07, shows that several new official Chinese border port”.161 In April 2007, the roads have been built for the timber trade, bypassing road was clearly visible but no timber was seen the official border crossing point in Pangwah Town. entering China.56 The timber entering China near Dian Tan and Tse The town of Nabang, Dehong Prefecture, is Tse nearby is mainly logged in the Triangle area of situated just opposite the headquarters of the Kachin Kachin State (see ‘10.3.1 Logging in the Triangle’, Independence Organisation (KIO) in Laiza. pages 77-78).53 Following a crackdown by police and Enforcement of the moratorium and Interim Measures government officials on 7 January 2007, which has been more patchy here than in most other places. stopped the transfer of timber from Dian Tan Town In January and March 2007, the flow of timber had to Tengchong further inland, the timber traders were stalled, but by April timber was again entering town. keen to transfer as much timber across the border Some of it was arriving through the new Munglai Dam before this route too was closed.52 Global Witness road (on the Kachin side of the border) bypassing the researchers tried to visit the town again in May 2007. Unfortunately, however, the road was blocked by a large truck carrying about 40 m3 of teak, which was stuck in the mud. This road had been badly damaged during the border reopening following the allocation of timber import quotas in July-August 2006.54 In May 2006, limited amounts of smuggled timber were available at high prices in Pian Ma, Nujiang Prefecture. A few trucks and small vehicles had managed to get the timber across. Others had been caught and fined and were seen waiting in the rain by the border checkpoint towards Datianba.55 By January 2007, contractors were busy constructing a new private road from Pian Ma into Burma, running Munglai Dam Road, Burma; March 2007

Logs illegally cut in Burma a few kilometres outside the town of Nabang, China; April 2007

A DISHARMONIOUS TRADE 20 Part A: Global Witness Research and Investigations in China 2006-09 / 6 The Burma-China Timber Trade official border crossing in central Nabang.57 This path 6.3.3 Timber transportation at night is apparently partly controlled and financed by the Hongxin Company.151 A large timber storage site, Transportation of timber in violation of existing moving timber trucks, and a Kachin Independence policies is often undertaken at night. According to Army (KIA) checkpoint were clearly visible by the locals in Nabang, despite the fact that customs had Munglai River, which marks the border between the stopped issuing, “any documents to any companies”, two countries.58 The other less frequented new road they had still seen ten trucks laden with teak arriving leads through the small town of Datugong on the in the evening, in early January 2007.62 In April Burma side of the border.151 Local logging workers 2007, logging workers confirmed that smuggling took confirmed, in April 2007, that timber could then not place at night in the area.59 Night-time transportation be imported through the official checkpoint, but had of timber in the wider Ruili area was also reported.63 to be smuggled through the mountains via trails and In mid-December 2006, the road near Pian Ma passes away from the main road.59 was busy at night with timber trucks. According to In early January 2007, timber was being imported one eyewitness, hundreds of noisy trucks were into the small timber town of Hong Bom He, near running throughout the night. Apparently, the Yingjiang in Dehong Prefecture. However, the timber carried by these trucks originated from near border army, the police, the SFA, and customs had the Chipwe Bridge, in Kachin State, which links the joined forces, and, in mid January 2007, a simple timber-rich Triangle area with transportation routes bridge, constructed privately by timber businessmen to the border.64 to smuggle in Burmese timber, was detected and In Cangyun Wa Nationality Autonomous destroyed by Chinese soldiers.60 County, in City Prefecture opposite In the Ruili area further south, locals showed Burma’s Wa State, enforcement has been stricter than Global Witness researchers various smuggling routes in most other places. Here, the Border Defence in the nearby towns of Nong Dao, Guo, and Brigade has been actively involved in stopping the Dengga. Stones had been arranged across the bed of illegal timber imports. In 2006, following the the Nanwan River, so that people, with their horses moratorium, smugglers managed to transport an and mules carrying teak, could cross safely. A estimated total of 10,000 m3 across the border. waiting truck or minibus would then carry the teak However, after the border checkpoint was moved away under cover of darkness according to a local closer to the border itself, removing a 1 km buffer man who, for fear of arrest, had declined to smuggle zone between the border and the checkpoint, local timber, despite the prospect of payments of 400 yuan people found smuggling more difficult; they had (US$52) per m3. During the day, many mules and previously managed to take about 300 m3 of teak and horses were seen grazing peacefully nearby.61 Burmese tulip wood across each night.65 Local timber traders complained to Global Witness that, “enforcement here is much more severe than anywhere else in Yunnan”.65 Further south in Meng'a, opposite the United Wa State Army’s (UWSA) headquarters in Pangsan, teak was being smuggled in at night but was gone in the morning.66 In Guyong, a timber businessman told Global Witness that, “depending on your actual power you can move timber in as you like by smuggling in the evening. But I cannot promise you for sure that the timber can be taken out of town, as no legal procedures are issued by customs at the moment.”67 A local driver confirmed that trucks carrying timber were passing the Chinese border checkpoint guarded by the army at night.68 Unofficial crossing point from Burma to China, Nong Dao; January 2007

21 A DISHARMONIOUS TRADE Part A: Global Witness Research and Investigations in China 2006-09 / 6 The Burma-China Timber Trade

timber in town, much of it round logs larger than 50-70 cm in diameter, was all from domestic sources.70 Global Witness was not able to verify this claim. In nearby Car Zan, several timber traders confirmed that foreign timber was mixed with domestic timber and that it was easy to obtain transportation certificates. Certificates for sawn timber were also obtainable.71 Interestingly, at least one company in Laying, near Ruili, was allowed to use both domestic and Burmese timber that had been confiscated by the SFA. At the same time, the big flooring and furniture factory F.N.D Woods Company Ltd., in nearby Wanding, Timber transportation at night, Yingjiang Town, China; May 2006 survived by using smuggled timber for which, apparently, they had no problems 6.3.4 Smuggling timber onwards from the border obtaining ‘legal’ transport certificates.72 In Hong Bom He, one of the two main timber Scams to smuggle timber from the border further traders, Mr Cun, was reported to have a good inland tend to be slightly more complex than those relationship with the local authorities including those designed to get the timber across the border. They based in the Tongbiguang Nature Reserve office. include laundering the Burmese timber into the This has enabled him to get a domestic cutting quota, domestic timber market, over-declaring the amount which has been used to cover illicit timber from of timber, and using fake transportation certificates. Burma.168 His sawmill still had supplies of timber The practice of declaring timber from Burma as nine months after the moratorium was announced.73 domestic timber is most widely used in the areas of The misuse of paperwork is also widespread. For Sudien and Car Zan near Yingjiang in Dehong example, timber traders have explained to Global Prefecture. This is probably due to the fact that this Witness how they use transportation certificates is one of the few areas along the border where a issued for a single shipment twice, thereby enabling quota for domestic logging has been allocated. As them to transport twice the permitted amount of one timber businessman explained, “Timber from timber to Kunming.74 Any reopening of the border here can be moved to Yingjiang with ‘clean will provide additional opportunities for fraud. As a procedures’. The timber storage sites simply mix timber trader from Pian Ma explained, “Hopefully domestic and foreign timber. The timber checking we can take timber out of town when we get the station does not really care about this and cannot document. When the border is open, the document distinguish between what is foreign and what is that comes with the new timber has an inflated value. domestic anyway.”330 We can then use that to transport the old timber.”75 Several trucks were seen heading from Sudien to Yingjiang in the afternoon of Global Witness’ visit in January 2007. Another local trader claimed that it was between two and three times cheaper to obtain transportation permits, from the SFA office, for domestic timber than it was for foreign timber.158 A third timber trade told Global Witness that, “You do not have to care about any procedures. If you bring money, business is simple. When you get the timber to Yingjiang you simply change the SFA certificate for timber transportation, and it can be transported anywhere in China. That’s all.”69 During Global Witness’ visit to Sudien in April 2007, all interviewees claimed that the Sudien, China; April 2007

A DISHARMONIOUS TRADE 22 Part A: Global Witness Research and Investigations in China 2006-09 / 6 The Burma-China Timber Trade

A few companies claimed that they were allowed to transport Burmese timber. They told Global Witness that this was legal because they had unused transportation certificates issued, by the SFA, either prior to the ban or during the allocation of quotas in mid-2006. This was the case in Gudeng in May 2006.76 The Yunnan Forestry Police has uncovered at least one major incidence where timber transport certificates had been forged. In November 2006, it confiscated 5,000 books of forged timber transportation certificates and more than 1,000 fake public seals: 12 people were arrested.77 In January Truck carrying squared-off logs from Burma, Nabang, China; April 2007 2007, the SFA in Yunnan Province stopped using existing timber transport certificates and began issuing a new version in order to combat the misuse of documents. Traders with unused certificates had to re-apply.78

6.3.5 Transshipment

Over the last decade large amounts of timber have also entered China overland from Shan and (see ‘A Conflict of Interests’, pages 110-114, and ‘A Choice for China’, pages 70-71). The moratorium on timber imports and Interim Measures also covers the Chinese border in this area. Destined for the railway station at Chuxiong, China; April 2007 The moratorium was strictly enforced in Cangyun Wa. However, timber has continued to arrive in Meng’a.79, 80 In January 2007, the customs authorities based in Meng’a insisted that timber could only be imported from Burma if it was going to be transshipped to destinations outside China. This is the only place along the China-Burma border that Global Witness has heard of such an arrangement. Three import-export companies in Pangsan obtained permission to conduct such a trade. The procedures for the transshipment are as follows: The size, amount, number, source, type of vehicle, and destination of the timber, which awaits shipment in Pangsan, must be reported to customs in Truck carrying Burmese logs, Yingjiang Town, China; April 2007 Kunming. If approved, Kunming customs inform the customs officials based in Meng’a. The timber is then allowed to be transported into Meng’a, onwards to Menglian, Kunming and finally to its overseas destination such as, for example, Taiwan.81 Several businessmen in the area said that they thought this arrangement was unfair to Chinese traders.66 In order to circumvent the rules, some traders have transshipped timber into , subsequently re-importing it into China.82 It is not clear how widespread this practice is. In the nearby border town of Mangxin, transshipment was not permitted but timber products in the form of flooring and panels could, in January 2007, be brought into China Sawn timber en route to Guangdong China; April 2007 as part of the normal trade.83

23 A DISHARMONIOUS TRADE Part A: Global Witness Research and Investigations in China 2006-09 / 6 The Burma-China Timber Trade

BOX 2: SPECULATION announcement to stop the illegal timber trade, SURROUNDING THE IMPOSITION around Burmese borders, immediately. Soon OF THE MORATORIUM AND after the announcement, all customs, AQSIQ, INTERIM MEASURES and SFA closed their offices, and the timber trade stopped.85 In the remote border areas of China and Burma One possible reason is that a while ago, while the speculations is rife among traders, logging workers, head of Kachin State, General Ting Ying, visited and officials as to why the moratorium and Interim Mandalay, his vice general mutinied. He used two Measures were imposed in the first place. Each quote battalions loyal to him to fight another three provides an interesting insight into the timber trade battalions loyal to Ting Ying. In the end, the vice and local perceptions of the balance in power between general lost the game, and Ting Ying got back his the various entities that can influence its operation. position. The Burmese government’s military Local people consistently brought up international caught the chance to get into and occupy some pressure, intervention by the United Nations, and that territories that used to belong to the KIO, where the Burmese government had requested the central most Chinese companies had contracts and timber Chinese government to close the border. Some of this workers working. The Burmese military speculation is well informed, some fanciful: government did not accept the situation where the • “However, the real problem was that some KIO let Chinese companies log in most of the KIO’s western media reported Chinese people territory. Therefore, we heard news about timber cutting in northern parts of Burma and workers killed, trucks blocked, logging stopped[...].” published pictures in magazines. This made the • “Last year illegal timber trading in Nabang was Burmese government put pressure on the Chinese exposed by the United Nations. The UK government to deal with the timber trade as government, as the former colonial power in normal trade such as the country to country trade, Burma, was displeased to see the Chinese taking not warlord or local military controlled trade. The Burma’s teak, which is a Burmese national Chinese government had lost face [because of the treasure, and as important for the Burmese as situation prior to the moratorium]. The cross-border pandas are for the Chinese. The British therefore timber trade is no longer allowed.”156 raised the issue at the United Nations. In • “The Chinese government seriously cracked down response the Chinese had to close the border on Chinese people logging in Burma. It blocked and take action against illegal logging.”86 the border passes to stop any Burmese timber • “Business is not good here as there is no timber business; no single piece of wood from Burma is trade. The timber is not coming in because the legal right now. This is because the Chinese Chinese government has banned illegal logging. government is trying to build a petroleum pipeline I don’t think business will get much better in the from , through Burma, to Yunnan Province in near future… because of the Olympics. The China. It needs to use Burmese land for this illegal logging damages the country’s image.”87 purpose. Therefore, the Chinese government does not want to trouble the Burmese military • “The central government closed the border government with the border timber trade because the Burmese government complained to situation, and risk losing the big petroleum thing the United Nations about the Chinese coming over with India.”84 the border and logging their illegally.”88

• “The Burmese Premier visited China and • “The illegal logging was reported to the United complained about the timber situation, in north Nations, therefore the ban on illegal logging. Myanmar, to the Chinese government. Then the Maybe the Burmese reported it. They felt that too Yunnan People’s Government released an much logging had damaged the environment.”89

Log trucks and cranes in storage, Nabang, China; January 2007

A DISHARMONIOUS TRADE 24 Part A: Global Witness Research and Investigations in China 2006-09 / 7 Decline in the Illegal Timber Trade on the China-Burma Border

7 DECLINE IN THE ILLEGAL TIMBER the most significant cause of the decrease in the illegal TRADE ON THE CHINA-BURMA BORDER Burma-China timber trade is the crackdown by the Chinese authorities. Figures from the Myanmar Global Witness carried out an extensive study of the Ministry of Forestry show that no timber crossed the timber trade along the China-Burma border in 2006- Burma-China border during the financial year 2007-08 07 to ascertain the impact of Burmese and Chinese and only 38,000 m3 in 2008-09.43 More than 90% of measures to combat the illicit timber trade. A follow- the border trade in logs and sawn wood is therefore up investigation along the border took place in early illegal according to information supplied to Global 2009. These investigations centred on Nujiang, Witness by the Burmese authorities. Baoshan, and Dehong prefectures in Yunnan During the first six months of 2009 log volumes Province, all of which border Kachin State. Global imported into Kunming customs district were similar Witness also analysed Chinese customs data. to the quantities imported 12 months earlier. At the time of writing, imports of logs through other 7.1 Decline in the illegal timber trade – customs districts have been almost zero each month an analysis of trade data so far this year. Sawn wood volumes imported into Kunming customs district tend slightly to exceed the Since the launch of Global Witness’ report ‘A Choice quantities imported in 2008. Sawn wood imports for China’, in October 2005, and the subsequent through other customs districts remain minimal.91 action taken by both the Burmese and Chinese Global Witness’ field research supports the authorities, against the illegal cross-border timber statistical information: the importation of timber trade, exports from Burma to China directly overland across the China-Burma border has declined have fallen dramatically. As can be seen in Chart 3 significantly since late 2005. Since then, only limited opposite illegal exports of timber from Burma to amounts of timber have been imported from Burma China, across the Burma-China land border, peaked into China. However, the degree of the decline varies at 1.52 million m3 RWE in the 2004-05 financial year. from border town to border town. Notable exceptions By 2008-09 illegal exports of timber from Burma to to this overall trend are discussed later in the report.c3 China had dropped by more than one million cubic Based on the map showing territorial control in meters to 440,000 m3 RWE. The trend in illegal Kachin State (see map on page 66), from north to south, timber exports has been generally downwards, the lower quarter of Nujiang Lisu Autonomous despite an increase in 2007-08, and reflects the success Prefecture is opposite NDA(K)-held parts of the border of measures implemented by the Burmese and as is Baoshan Prefecture, and the KIO controls the land Chinese authorities to combat the illicit trade. The along most of the border with Dehong Dai Jingpo global economic crisis may also have played a part. . The SPDC controls border It can be seen from Chart 4 opposite that the regions in the far north, opposite Nujiang Prefecture, importation of both logs and sawn timber, from and short sections of the border opposite Dehong Burma into China, reached a peak of 1.72 million m3 Prefecture. The SPDC also runs the border at Muse in RWE in 2005. The Chinese imported 1.57 million m3 Shan State, the likely origin of most of the timber of this timber, representing 91 per cent of the total, crossing here. However, there are also crossing points across the land border into the Kunming customs into Ruili under the control of the KIO. Muse is the district. In 2008, the border trade accounted for only only legitimate border checkpoint for timber exports on 66% by volume of the total timber trade between the China-Burma border according to the Myanmar the two countries, 440,000 m3 out of a total 670,000 Ministry of Forestry.92 m3. Most of the drop in percentage terms is It can be seen from Chart 5 opposite that most of the accounted for by an increase in log imports via logs, imported into China from Burma over the land Rangoon by sea into Nanjing, the capital of China’s border, have been imported into Dehong Prefecture, Jiangsu Province, on the River Delta. apparently across areas under the control of the KIO. According to the Chinese data, log imports across Since 2005, there has been a dramatic decrease in the the Burma-China land border have fallen by more than volume of logs being exported, approximately 720,000 70% from 1 million m3 in 2005 to 270,000 m3 in 2008. m3. A drop in imports into Dehong Prefecture accounts Sawn wood imports into Kunming have also fallen, for 65% (470,000 m3) of the total. 2007 saw a significant from a high in 2005 of 570,000 m3 to only 170,000 m3 increase in the trade further north in Nujiang in 2008. The global financial crisis may be a factor but Prefecture, perhaps a deliberate ploy to avoid detection.

c3 See the Kachin News Group videos, “China imports illegal timber from Northern Burma”, and, “Illegal Timber from Kachin State in China”, on YouTube: http://www.youtube.com/watch?v=cS5c73jrpDg&feature=channel_page and http://www.youtube.com/watch?v=gJ- u8aiwRl0&feature=channel_page

25 A DISHARMONIOUS TRADE Part A: Global Witness Research and Investigations in China 2006-09 / 7 Decline in the Illegal Timber Trade on the China-Burma Border

CHART 3: A COMPARISON BETWEEN BURMA’S DIRECT TIMBER EXPORTS OVERLAND TO CHINA AS DECLARED BY BURMA,c4, 90 AND THE CORRESPONDING IMPORTS AS DECLARED BY CHINA. SOURCES: MYANMAR MINISTRY OF FORESTRY DATA AND BASED ON CHINESE CUSTOMS DATA 1.8 1.6 Minimum quantity of illegal exports 1.4 Official exports

metres) 1.2 c 1.0 ubi c 0.8 0.6 0.4 (million Estimated RWE volume 0.2 0 2004-05 2005-06 2006-07 2007-08 2008-09

Notes: Financial year (1 April - 31 March) 1. The height of each column shows the total RWE volume of Chinese imports of Burmese timber (based on Chinese customs data). 2. The minimum quantity of illegal exports of timber from Burma to China, across the Burma-China land border, is equivalent to the total RWE volume of Chinese imports of Burmese timber (based on Chinese customs data) minus the total RWE volume of Burmese timber exports to China (according to the Myanmar Ministry of Forestry). 3. It is assumed that for the direct overland trade Burma has no records of trade in timber other than of the type specified by the Myanmar Ministry of Forestry. Chinese customs data indicate that other categories of timber are imported across the Burma-China land border.

CHART 4: CHINA’S IMPORTS OF LOGS AND SAWN WOOD FROM BURMA (BY CUSTOMS DISTRICT). SOURCE: BASED ON CHINESE CUSTOMS DATA

1.2 Shanghai Nanjing 1.0 Guangdong Kunming 0.8 Others metres) c 0.6 ubi c 0.4 (million Estimated RWE volume 0.2

0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Logs Sawn wood CHART 5: CHINA’S IMPORTS OF LOGS FROM BURMA BY LOCATION OF IMPORTER IN YUNNAN PROVINCE CHINA.c5 SOURCE: BASED ON CHINESE CUSTOMS DATA

Ruili Opposite Shan State Nujiang Baoshan Dehong Others

1.0 100

0.8 80

metres) 0.6 60 c ubi

c 0.4 40 Volume Import value 0.2 (US$ million) 20 (million 0 0 2005 2006 2007 2008 2005 2006 2007 2008 c4 It has been assumed that the Myanmar Ministry of Forestry has converted volumes for processed timber into RWE volumes. This may not be the case, however processed timber represents only a small fraction of overall exports and this is unlikely to affect the analysis significantly. c5 Location of importer indicates the declared address of the business to which the consignment is being delivered and is usually situated geographically within the customs district through which a consignment is imported

A DISHARMONIOUS TRADE 26 Part A: Global Witness Research and Investigations in China 2006-09 / 7 Decline in the Illegal Timber Trade on the China-Burma Border

Despite a significant decrease in the volume of because trade under the control of the Burmese logs crossing the border (more than two thirds), the authorities has increased. value of the logs being imported into China was As can be seen from Chart 6 the vast majority of almost the same in 2008 as it was in 2005, just under logs crossing the Burma-China border in 2005 were US$100 million, according to Chinese customs data. ‘other hardwood’ and most of the subsequent drop This may reflect greater transportation costs, and a is accounted for by a massive fall in hardwood need for bigger bribes as a result of the crackdown, exports. The only category of logs to increase since resulting in higher prices or a switch to higher value the crackdown is rosewood, a luxury species. species.c6 Interestingly, the value of logs being However, this is unlikely to account of the imported into prefectures opposite Shan State has increased value of the cross-border trade because of increased significantly since 2005. This could be the small volumes involved. Prior to the crackdown most of the sawn wood entering Yunnan province from Burma was being imported by businesses whose declared address was Kunming (‘others’ on Chart 7). This practice ended in 2006, but it is not known if these companies ceased importing sawn timber into Kunming or simply relocated closer to the border. In 2005, only 20,000 m3 of sawn timber was imported into Dehong prefecture rising dramatically in 2007 to 290,000 m3. This could reflect the KIO’s desire to add value, in the face of Chinese truck carrying various timber species cut in Burma greater restrictions, or to avoid detection. Imports of sawn wood into prefectures opposite Kachin State plummeted in 2008. By way of contrast, sawn wood imports from Shan State doubled in volume and more than trebled in value. This may be because of an increase in trade in timber from MTE sources. As can be seen in Chart 8, all categories of sawn wood have decreased since the crackdown, most notably ‘other hardwood’. The amount of teak exported across the border has almost halved and imports of softwood are now close to zero. Fir sawn wood, Gudeng, China; January 2007

c6 This would appear unlikely as the volume of all species exported to China has fallen since 2005, apart from rosewood (see Chart 6).

27 A DISHARMONIOUS TRADE Part A: Global Witness Research and Investigations in China 2006-09 / 7 Decline in the Illegal Timber Trade on the China-Burma Border

CHART 6: CHINA’S IMPORTS OF LOGS FROM BURMA VIA KUNMING CUSTOMS DISTRICT BY SPECIES. SOURCE: CHINESE CUSTOMS DATA

Other hardwood Keruing / Gurjan Rosewood Teak Oak Softwood 1.0 0.8

metres) 0.6 c ubi

c 0.4 Volume 0.2

(million 0 2003 2004 2005 2006 2007 2008

CHART 7: CHINA’S IMPORTS OF SAWN WOOD FROM BURMA BY LOCATION OF IMPORTER IN YUNNAN PROVINCE CHINA. SOURCE: BASED ON CHINESE CUSTOMS DATA

Ruili Dehong 0.6 Baoshan Others 60 Opposite Shan State

0.5 50

0.4 40 metres) c 0.3 30 ubi c Import value (US$ million)

RWE volume 0.2 20 (million 0.1 10

0 0 2005 2006 2007 2008 2005 2006 2007 2008

CHART 8: CHINA’S IMPORTS OF SAWN WOOD FROM BURMA VIA KUNMING CUSTOMS DISTRICT BY SPECIES. SOURCE: BASED ON CHINESE CUSTOMS DATA

Other hardwood 0.7 Teak 0.6 Softwood 0.5 metres) c 0.4 ubi c 0.3 RWE volume 0.2 (million 0.1 0 2003 2004 2005 2006 2007 2008

A DISHARMONIOUS TRADE 28 Part A: Global Witness Research and Investigations in China 2006-09 / 7 Decline in the Illegal Timber Trade on the China-Burma Border

7.2 Decline in the illegal timber trade – field the border to reopen and that they would resume their research in Yunnan Province, China activities if that were to happen.325 As a result of the difficulty in obtaining both The fall in timber imports has had an immediate import and transport permits only limited amounts impact on sawmills and wood-processing all of Burmese timber have been transported from the along the border. In April 2007 for example, only border to Kunming or further inland. In sharp three of the ten biggest factories in Ruili were still contrast to 2004, in 2007 Global Witness researchers running, and they were operating at reduced capacity. only saw two trucks openly carrying logs on the The main wood-processing towns of Yingjiang, Pian main highway between Kunming and the border, one Ma and Tengchong have also been hit hard.93 of which was going towards the border. The other Slogans such as, ‘Long live the border trade’, and was heading to the Chuxiong freight train station, 'Timber trade is the glorious way to prosperity', still 160 km from Kunming on the road to Dali, from adorn the white walls of the development parks in where timber is transported to other parts of Chinese towns all along the border with Burma. China.96 However, it is not known how many of the However, the notice boards in public squares tell numerous, large, closed trucks, also plying the a different story: ‘Workshop for rent. Suitable as highway, were carrying sawn timber, out of view of timber processing factory’, and ‘High speed electric the public and the enforcement agencies. Global saws for sale.’ In 2003, Pian Ma had a floating Witness inspected two such trucks which were both population of 37,000; mostly migrants involved in the found to be carrying around 40 m3 of sawn timber. timber trade. However, in 2007 most of the factories One of them was going from Yingjiang Prefecture to in Pian Ma had closed down, almost all the timber Guangdong, on the eastern seaboard.97 traders had left, and even the red light district was In May 2007, large piles of timber were seen at deserted.94 By March 2009, the timber trade had railway freight stations in Chuxiong, and in Fengyi picked up a little and some of the bars and karaoke on the outskirts of Dali, both of which are key clubs had reopened.95 transport hubs for Burmese timber. In Chuxiong, Significant amounts of timber have been stored on which is preferred by timber traders from the the Chinese side of the border. In addition, large Tengchong area,98 logs with a diameter of more than amounts of timber were also piling up on the Burmese 70 centimetres were being loaded onto railway side and more remotely in the forests of northern wagons. More logs were seen at the Fengyi railway Burma (see ‘10 The decline in illegal logging in Kachin compound, some of which were in the process of State’, pages 69-96). In almost all timber towns visited being loaded onto trains. This contrasted greatly with in 2006-07, traders reported that they were waiting for the situation in May 2006, when the storage area was almost empty, containing only small amounts of timber mainly from Gudeng in Nujiang Prefecture. A local timber trader explained at the time, “Today’s situation cannot be compared to the past timber booming years. In the past, every storage area was full of timber like mountains high, trucks were busy around the clock and the timber business was hot. Now, there is only about 1,000 m3 in storage here and only little timber business going on.”99 Fengyi railway freight station; April 2007

29 A DISHARMONIOUS TRADE Part A: Global Witness Research and Investigations in China 2006-09 / 7 Decline in the Illegal Timber Trade on the China-Burma Border

7.2.1 Nujiang Lisu Autonomousc7 Prefecture

“[…] the situation of timber trade in Pian Ma is very complex and hard to deal with. In some situations we, representatives of the government, can only open one eye and close another.”100 Customs official, Yunnan Province, January 2007

The picture was mixed in the northern prefecture of Nujiang. The small timber town of Gudeng, which only began importing timber from Burma through the Ega Pass in early 2006, was the only town in this area with fresh imports of timber in May 2006. In late December 2006, local authorities stopped issuing permits for the timber to be transferred from the border further inland.101 In the remote towns of Fugong and Gongshan customs had stopped timber imports by May 2006. However, during subsequent Global Witness visits it was clear that relatively large amounts of timber Gongshan; October 2006 had been imported between May and October 2006 and stored in town.102 Global Global Witness did not revisit these towns on the Witness found increased amounts of timber stored in 2009 trip to the Burma-China border but, according all three towns in early 2007. Despite this, timber to a timber trader from Province, timber had traders told Global Witness that they did not expect yet to be imported into Gudeng during the 2008-09 the border to reopen for another three years.103 logging season.104

Gudeng; October 2006 c7 Autonomous prefectures either have a population comprising over 50% ethnic minorities or, historically, have a significant ethnic minority contingent.

A DISHARMONIOUS TRADE 30 Part A: Global Witness Research and Investigations in China 2006-09 / 7 Decline in the Illegal Timber Trade on the China-Burma Border

Pian Ma, further south, is about 360 kilometres for China’, page 40 for further information) Pian Ma north, and ten hours by bus, from Tengchong. In has experienced a drastic decline in timber imports order to reach the town, which is 1,950 metres above from Burma in recent years. As a result, between 70 sea level, one has first to drive through an “elfin and 90% of the town’s two hundred or so sawmills rhododendron forest” on the Pian Ma Pass at more had gone out of business by May 2006 and there was than 3,000 metres. Much of the southern almost no timber in town. These mills have not Gaoligongshan Mountain range is protected on the reopened, apart from one instance in July 2006 (see Chinese side of the border.105 Indeed, signs can be ‘7.2.6 Re-opening the China-Burma border for the seen throughout the region entreating people to timber trade’, pages 43-44).107, 108 By March 2009, the protect the environment: ‘By protecting the Jinxin Company, previously the largest timber we are protecting ourselves’, company in town, had closed its huge timber storage ‘People and nature developing in harmony’, ‘Protect area and relocated its offices to Tengchong. The eco-environment, beauty homeland’ and so on.106 The Hongda sawmill, the biggest of its kind in Nujiang contrast across the border in Burma and in the Prefecture, appears to have closed entirely.109 sawmills of Pian Ma could not be starker. Once the For long periods, only limited amounts of timber largest timber hub in Yunnan Province, (see ‘A Choice have entered Pian Ma. The transfer of timber from the town to Kunming, and other places further inland, has been restricted even more. However, local traders did report an upsurge of timber imports during July-August 2006.110, 111 Global Witness researchers were faced with a mountain of timber, with an estimated volume of 150,000 m3, upon arrival in January 2007. Most of this was stored at the old U.S. airstrip just north of the main town. By April 2007, significant amounts of timber were still at the airstrip apparently stranded here because its owners could not obtain the necessary paperwork to clear customs and to transport it further inland. In March 2009, there were about 20,000 m3 of timber in Pian Ma, again most of it near the airstrip. The timber traders, loggers, miners, prostitutes, and heroin traffickers from Province had, to a limited extent, begun to return. But Pian Ma Town has very little to show for its boom years. Many of the old mills were now torn and tattered and much of the accommodation had been demolished, but the town was busier than at the height of the crackdown in 2006-07. There are about ten prominent timber traders left in Pian Ma, most, if not all, of the large companies have left. Two of these small outfits, Hongrui and Yuantong, like the others are involved in logging and associated road building in forests controlled by the ‘mountain army’ in Burma. Some of the work is sub- contracted to smaller companies. Many “Protecting Forest Resources”, Pian Ma, China c8 Species available in March 2009 included: Bainanmu (Phoebe spp.), Huangxinnan (Phoebe puwenensis), Lengshan (fir) (Abies nukiangensis), Shanan (Zelkova schneideriana), Tieshan (Tsuga dumosa), Tusha (Taiwania cryptomerioides), Xiangbo (Sabina pingii var. wilsonii), and Yulinchun.

31 A DISHARMONIOUS TRADE Part A: Global Witness Research and Investigations in China 2006-09 / 7 Decline in the Illegal Timber Trade on the China-Burma Border are losing money on the timber that they sell in Pian Ma. The loss is, at least in part, made up for by sales of higher quality timber.c8, 112, 104 According to one source, the timber can be harvested to order by loggers working on the western slopes of the Gaoligongshan Mountains in Burma. Here, they are rarely, if ever, troubled by the Tatmadaw c9 (the military in Burma).104 The cost of documentation, from the SFA, customs, the department of commerce, and other relevant agencies, varies depending on the type of timber, the quality of the timber and the degree of processing. For example, documentation for Tsuga spp. costs 200 yuan (US$29) per cubic metre for logs and 240 yuan (US$35) for sawn timber. Tsuga spp. sells for 1,200 yuan (US$175) per cubic metre for Pian Ma; January 2007 unprocessed timber and 1,600 yuan (US$234) per cubic metre for sawn timber. Documentation for Sabina sp. costs about double that of Tsuga spp. but top quality timber can be sold for as much as 6,000 yuan (US$88) per cubic metre. By May 2006, in nearby Kangfang in Burma, the prominent De Long Forest Resources Co., Ltd. had also shut down its timber- processing facilities.113 In April 2009 Global Witness researchers saw 20 blue log trucks, within three hours, en route to Pian Ma. Log trucks seemed to be able to cross the border unrestricted, however most travel at night.104, 112 Pian Ma; March 2009

Pian Ma Town has very little to show for its boom years; March 2009 c9 The army is called the Tatmadaw Kyee, the air force Tatmadaw Lei, and the navy Tatmadaw Yay.

A DISHARMONIOUS TRADE 32 Part A: Global Witness Research and Investigations in China 2006-09 / 7 Decline in the Illegal Timber Trade on the China-Burma Border

7.2.2 Baoshan Prefecture Tan, a small town in the same area, were busily importing timber through an unofficial border The large town of Tengchong has at least four ‘feeder crossing in early 2007 (see ‘6.3 Snake business’, pages towns’ near the China-Burma border that supply it 18-23).117 Dian Tan is situated opposite Pangwah with timber.114 By May 2006, timber import into these Town, the headquarters of the NDA(K) in Burma. towns had been much reduced although some timber In May 2006, Global Witness researchers saw at was still crossing the border and being transported to least 70-80,000 m3 of stored timber in four of the Tengchong.115 The feeder towns of Guyong and border towns feeding Tengchong with timber.118 By nearby Houqiao had experienced a decrease in imports early 2007, volumes of timber had slightly increased from an estimated 30-40,000 m3, between January and in Guyong and Houqiao, and decreased marginally May 2005, to maximum of 10,000 m3 during the same in Tse Tse, compared to May 2006. In Tse Tse at least period in 2006.116 In January and May 2007, the trade 15-20,000 m3 of timber was stored along the road was limited in Guyong, Houqiao and the feeder town between the town and the Burma border.119 The of Tse Tse. By way of contrast, timber traders in Dian amount of timber seen in Dian Tan had doubled by 2007 to approximately 40,000 m3. Some timber had been transferred further inland from all of these towns, in particular Dian Tan and Tse Tse.120 According to the Yunnan Department of Commerce, in a report dated 26 June 2006, 500 out of 1,000 timber processing factories in Tengchong County have had to close as a consequence of the suspension of timber imports. Some 5,000 out of the 10,000 people employed at these factories have lost their jobs, and service related industries have faced difficulties. Again according to the report, 5,000 trucks previously used for mineral and timber transport have been left unused.121 Global Witness has not been able to independently verify these figures. Tse Tse; January 2007

Log storage area, Guyong; January 2007

33 A DISHARMONIOUS TRADE Part A: Global Witness Research and Investigations in China 2006-09 / 7 Decline in the Illegal Timber Trade on the China-Burma Border

Global Witness returned to Baoshan Prefecture in March 2009. In TIMBER PRICES IN DIAN TAN MARCH 2009 Chinese name Scientific name Price yuan/m3 Price US$/m3 Dian Tan timber traders told Global Guazao Hovenia dulcis 2,600 380 Witness researchers the prices of the Heixinnan Magnolia baillonii 3,000 439 most readily accessible timber tree Heitaomu 2,300 336 species (see opposite). Others such as Hongchun Toona ciliata 1,900 278 Aishan (Morus australis), Baimu Huangyunxiang Cantleya corniculata 2,400 351 (Brassaiopsis spp.),d1 Kelongmu (in) Huangxinnan Phoebe puwenensis 2,000 292 (Dipterocarpus turbinatus), Matihe Hupinan Daphniphyllum paxianum 2,000 292 (Exbucklandia populnea), Mumian Jiayoumu Dipterocarpus spp. 2,300 336 (Bombax ceiba), Tiejianshao (Shorea Jinsinan Phoebe sheareri 1,000 146 spp.), Wujiaofeng (Acer pictum), and Kasinan Viburnum cylindricum 1,800 263 Zhasang (Morus spp.), were available Lengshan Abies nukiangensis 2,000 292 only in small quantities and generally Limu Quercus spp. 800 117 Nianzao Chukrasia tabularia 1,400 205 much harder to source.122 Shanan Zelkova schneideriana 2,100 307 The same timber traders told Tieshan Tsuga dumosa 2,000 292 Global Witness that prices had Xiangzhang Cinnamomum glanduliferum 1,800 263 generally decreased only slightly Xiananhua Betula spp. 2,500 365 over the past year, despite the global Yulinchun Toona sp. 2,300 336 economic downturn, on average by 10%. The main reasons given for this were that they had to travel deep into Burma, 170 one quarter of its maximum capacity. However, wood kilometres from the border, to cut the timber and they was arriving and departing on a regular basis each day. had to establish a good relationship with each new Guangzhou, the capital of Guangdon Province, Tatmadaw commander every three months. , Beijing, Shanghai, Sichuan Province, Japan According to the traders the going rate for good and Korea were all mentioned as destinations for their relations with the Burmese military is about one stock.122 On one road there were about 50 sawmills million yuan (US$146,000). Completing all the but most, perhaps 90%, had closed down. There were relevant procedures in China costs about 400 yuan many log trucks in town, which appeared busier than (US$58) per cubic metre of timber.122 At the time of at the height of the crackdown possibly because of an Global Witness’ visit, the timber storage ground in increase in the mineral trade with Burma, road Dian Tan contained about 10,000 m3 of timber, about building, and other development projects.

Sawmills along the river. A few still are alive, Dian Tan; March 2009 d1 Spp. is the plural of sp. meaning species. Many trade names such as Keruing encompass more than one species of the same . Ssp. means subspecies.

A DISHARMONIOUS TRADE 34 Part A: Global Witness Research and Investigations in China 2006-09 / 7 Decline in the Illegal Timber Trade on the China-Burma Border

From Dian Tan Global Witness researchers entirely reliant on the timber trade, which perhaps travelled north to the small town of Tse Tse. Despite explains the rather lax enforcement of the new repeated requests to pass the border checkpoint the regulations here. A taxi driver, for example, can double police refused. In the past, large quantities of logs have his 2,000 yuan (US$292) monthly income during the been stored along the main road about 2 kilometres logging season.124 According to local people, the border from the checkpoint. However, Global Witness was defence police take money from the log truck drivers told that all the timber had been moved to avoid a and timber businessmen. The procedures in China are recent forest fire in the area.123 Tse Tse is almost easy to comply with, whereas in Burma, in reality, there is no process at all other than to have a good working relationship with the ‘mountain army’ and the Tatmadaw. Since the start of the logging season about 20,000 m3 of timber had been imported into Tse Tse. This was then stored in one of six stock grounds or 10- 12 sawmills. The logs generally comprised high quality species but the loggers had to travel up to 200 kilometres into Burma to find them, particularly those of large diameter.d2 The largest amount of timber found in the Tengchong area, approximately 30,000 m3, was found Heixinmulian logs from Burma, Guyong; March 2009 in Guyong Town situated north-west of Tengchong near the border port of Houqiao. Eleven log rest areas were seen along the main road leading from town to the border. Guyong also had 45 sawmills, three of which were closed down. Despite the ready supply of timber from Burma, timber traders complained that there weren't many buyers. Transportation costs had increased, because of the need to build roads through the mountains up to 200 kilometres into Burma, as had the fees on the China side. However, the cost of securing a mountain to log and transport 'taxes' in Burma had fallen. As a result, the price of timber had Houqiao (Guyong) log storage area; March 2009 dropped only slightly. Most of the companies operating in Burma were small, with an operating capital of around ten million yuan (US$1.5 million). In contrast to previous years, the companies were run predominantly by local people with very good contacts in Burma. Clearly, sharing the same language, culture, customs, and, often, family helps the businesses run smoothly.125 Tse Tse, Burmese logs and Chinese (Beijing) Jeep; March 2009 d2 Amongst other species Global Witness researchers saw: Baimu (Brassaiopsis spp.), Handonggua (Alnus nepalensis), Heitaomu, Heixinnan (Magnolia baillonii), Hongmu (Bixa orellana), Hupinan (Daphniphyllum paxianum), Limu (Quercus spp.), Matihe (Exbucklandia populnea), Qingsong (Pinus griffithii), Qiumu (Catalpa fargesii), Shuidonggua (Alnus ferdinandi-coburgii), Shanxiangguo (Lindera metcalfiana var. dictyophylla), Tieshan (Tsuga dumosa), and Xianbo (Wilson juniper) (Juniperus pingii var. wilsonii).

35 A DISHARMONIOUS TRADE Part A: Global Witness Research and Investigations in China 2006-09 / 7 Decline in the Illegal Timber Trade on the China-Burma Border

7.2.3 Dehong Dai Jingpo Autonomous Prefecture

“Before, big bosses and small bosses, all came over here for timber business. I didn’t know exactly how many trucks coming and going, countless. Now, so few trucks.” Elderly woman at a grocery store in Sudien, near Yingjiang, Dehong Prefecture, April 2007

By May 2006, and during subsequent visits by Global Witness in January and April 2007, it was apparent that large-scale imports of timber had been brought to a halt in this area. In April 2007, all the companies had either closed or drastically reduced their processing operations. Little timber was left in storage, and Global Rongmao, Ruili City; April 2006 Witness researchers did not observe a single truck transporting timber during a four-day period.126 laden log truck and no timber stockpiles. There were a Smuggling had increased though. couple of small sawmills on the edge of town, but In the large Ruili area, about 700 kilometres and only one was processing timber.129 What was left of eleven hours by bus from Kunming, the four leading the timber trade appeared to be dominated by the timber-importing and wood-manufacturing Ruili City, Rongmao, Business, Trading Co. Ltd. companies all reported that they had been forced to According to sources close to the company, it had stop moving timber across the border since the end of survived essentially because of its large size, ready March 2006. This is presumably because they had access to significant sums of money, and good been dealing in timber cut without the appropriate contacts both in Burma, with the SPDC and the KIO, authorisation in Burma and, as a result of the and in China.40 The China-Burma border was no ban/Interim Measures, could no longer import the longer closed to the timber trade, a fact later timber without the appropriate documentation. That confirmed by the SFA in Beijing,130 and timber was said, they had managed to import large amounts of still available. Global Witness was told that the timber prior to the border closure, and immediately company had no problem importing timber from afterwards. One company explained that before the Burma and appropriate documentation was easy to closure they, “[…]had spent three days and nights acquire. Whether or not the documentation was moving timber from Myanmar to China, with 180 actually valid is a different matter entirely and difficult trucks, and reported it all to customs in order to obtain to ascertain. However, given the problems legal certificates.”127 Large storage sites visible in May experienced by loggers working for Rongmao in early 2006, containing more than 20-30,000 m3 of logs, were 2009, it is probable that the company was not almost empty in both January and April 2007.128 operating entirely in accordance with the law, if at all In February 2009, despite being on the lookout in (see ‘10.3.2 Logging and timber transportation in Ruili, Global Witness researchers saw only one fully KIO-controlled areas near the border’, pages 81-83).131

Log storage area, Ruili City; April 2006

A DISHARMONIOUS TRADE 36 Part A: Global Witness Research and Investigations in China 2006-09 / 7 Decline in the Illegal Timber Trade on the China-Burma Border

North of Ruili, in the Yingjiang area of Dehong and Sudien. Two timber stockpiles were also located. Prefecture, the suspension of timber imports was not One, measuring at least 160 metres by 160 metres, implemented until June 2006 and enforcement has been contained teak logs belonging to the Hongxin patchy.132 At its peak, Yingjiang Town had an estimated Company. Rumours that the company still had about maximum of 300 sawmills and timber-processing 20,000 m3 of teak in storage, but no buyers, would factories, many of them located in the area near Budui appear to have some veracity. Log trucks were also seen Lu (Military Road).133, 134 However, almost all of them in Yingjiang Town, after dark.137 had closed down by June 2006. They were still closed In April 2007, in Nabang, Global Witness saw 10 during subsequent Global Witness investigations in trucks carrying squared-off logs arriving at the large 2007.135 Global Witness found more timber stored in storage compound of the powerful Hongxin company, Yingjiang, and the border towns near Yingjiang, in within a 20 minute period. Hongxin once controlled 2007 than in 2006.136 By early 2009 only a few small most of the timber trade in Nabang. The compound companies were open for business, relying on timber was already partially filled with fresh logs. Another logged illegally in more remote and inaccessible forests 3,000 m3 of logs were stored near the river, by one of in Burma. Forty of the 55 sawmills seen along a two- the two unofficial border crossings, which use the so- kilometre stretch of the Budui Lu were closed. Those called Munglai Dam Road and bypass the official that were open were processing timber from Car Zan border checkpoint in Laiza Town. On the road from Nabang near Yingjiang, by a large electricity relay station, a further 15,000 m3 of timber was stored at the Hongan Timber Company storage area. Another seven trucks were waiting to unload square logs during Global Witness’ short visit. In May 2006, in nearby Car Zan, numerous log trucks entered China from Burma; customs was closed throughout the holiday period. Many of these trucks had been checked and let through by a member of the Border Defence Brigade.138 This was in stark contrast to the situation in February 2009. Not one log truck was seen on the newly upgraded road from Car Zan to Yingjiang. Global Witness researchers were told that most of the Yingjiang Town; May 2006

Hongxin’s log storage area, Yingjiang Town; March 2009

37 A DISHARMONIOUS TRADE Part A: Global Witness Research and Investigations in China 2006-09 / 7 Decline in the Illegal Timber Trade on the China-Burma Border timber transportation in this area took place at night. Alnus sp. to 3,000 yuan (US$439) per cubic metre for Only one timber truck was seen at the border Manglietia spp.d5, d6 Global Witness researchers were checkpoint, being inspected by the border police, about also offered extracts from the CITES-listed Himalayan 10 kilometres from the real border. The border police Yew (Taxus wallichiana) on a couple of occasions (see were charging each truck, which can carry between 20- ‘A Choice for China’, page 25). All the timber was from 40 m3 of timber, 50 yuan (US$7) to enter China and 120 Burma. For each species, on average, the various yuan (US$18) ‘service fees’. Global Witness researchers authorities were found only three timber stockpiles containing less than paid 300 yuan 20,000 m3 in total. They were all located near the (US$44) in total for customs office about half a kilometre from the border processing a cubic checkpoint. Apparently, the customs director had been metre of timber moonlighting as a timber broker. The number of through the system. sawmills also dropped dramatically from between This compares to twenty and thirty in 2004 to less than five in 2009 each 270 yuan (US$39) employing no more than ten people. However, it would in Car Zan.137 SDK-1. Proof of legal origin? Sudien; appear that those traders that remain were experiencing March 2009 little or no trouble importing timber from Burma and had many species for sale.d3, 131 Further north in Sudien, Global Witness found two timber stockpiles and 5 working sawmills during the 2009 trip to the border. Ten fully laden log trucks were seen at one of the stockpiles. None of the traders spoken to by Global Witness were at all concerned by the new procedures for importing Burmese timber into China, mainly because they were not being enforced. That said, Global Witness was told that each log was marked with capital letters, such as SDK-1, and that this was proof the timber had been authorised by the Burmese authorities. It is not known what these letters stand for, nor indeed which authority, the SPDC or an Burmese timber in Car Zan; May 2006 armed ethnic opposition group, had put them there. On previous occasions Global Witness researchers saw only abbreviations of Chinese company names hand-written on the logs. The traders were more interested in the quality of the timber, volumes, and tree species than in any new regulations. More than 20 timber tree species could be found in Sudien.d4 Prices varied from between about 300 yuan (US$44) per cubic meter for Burmese timber in Car Zan; March 2009

d3 These included: Bianselong (Pterocarpus tinctoriu var. chrysothri), Guaizao (Hovenia dulcis), Heixinnan (Magnolia baillonii), and Jiayoumu pseudo teak (Dipterocarpus spp.), as in Sudien (below) together with Kelongmu (in) (Dipterocarpus turbinatus), Kulianzhi (Azadirachta indica), Maisuo (Hopea ssp.), Tiechun (Chukrasia tabularia), Mianbai (Michelia champaca), Wujiaoxin (Juglans regia), and Zhashang (Morus sp.) d4 These included: Baicuipi, Baimulian (Manglietia spp.), Daoguazhishu, Hongcuipi, Hongmu (Bixa orellana.), Hupinan (Daphniphyllum paxianum), Jiakelong, Jinsinan (Phoebe sheareri), Kasinan (Viburnum cylindricum), Laoshudajianshu, Limu (Quercus spp.), Matihe (Exbucklandia populnea), Mulianhuashu, Nanmu (Phoebe nanmu), Shuidonggua (Alnus ferdinandi-coburgii), Wolumu, Xinanhua (Betula alnoides), and Yaoqianshu. d5 Manglietia is a genus in the family Magnoliaceae. Four out of the 37 or so known species are found in Burma (http://www.magnoliasociety.org/classifications_ndx.html). d6 Five are on the IUCN Red List of Threatened Species. All five threatened species are found in Yunnan Province in China, and two of these are used in construction. For more information see: http://www.iucnredlist.org/

A DISHARMONIOUS TRADE 38 Part A: Global Witness Research and Investigations in China 2006-09 / 7 Decline in the Illegal Timber Trade on the China-Burma Border

BOX 3: HONGXIN Town. In addition, 20 trucks were seen waiting at customs to clear their loads of timber. They were all “The boss of Hongxin started his business as a driver processed within two hours. The scene during March- and now he has a big company.” Wooden hammer handle April 2006 had been even busier. Trucks were seen one maker from Tengchong, May 2006 after another all along the road, “often causing delays up to two-three hours”.142 The Hongxin company, owned by Mr Ying Xinquan, In May 2006, a Chinese timber market researcher, once had a near monopoly on timber imports into mistaken for a reporter, had to be saved by local police Nabang, in Dehong Prefecture. The company continued after up to ten employees attacked him. People importing timber from Burma for long periods of time associated with Hongxin Company had previously despite the order to suspend the trade in March 2006. attacked four reporters from Beijing, smashed their This probably had something to do with the close equipment, seriously wounding one of them. During the relations between local authorities on both sides of the court case that followed, the company was reportedly border, controlled by the KIO on the Burma side and sentenced to pay 4.5 million yuan (US$585,000) in ethnic Kachin on the Chinese side of the border. As damages for the broken equipment and 500,000 yuan much as 80% of Yingjiang County’s income is thought (US$65,000) in medical fees. However, no individual to have derived from the timber trade.151 Indeed, was identified or held personally liable.143 Global Yingjiang's revenue may have fallen by up to two Witness has not been able to verify this information. thirds following the imposition of the moratorium and In early 2007, Hongxin stopped importing timber to new rules governing the timber trade.139 Nabang. However, by April the storage area was filling The gate of Hongxin’s storage site in Nabang, up once more. Truck drivers working for the company, which held an estimated 30,000 m3 of timber in May carrying loads of 15-20 m3 to Yingjiang, claimed that 2006,140 had a sign fixed to it which stated, ‘This the timber all had legal certificates.144 It is possible storage area is appointed by customs.’141 Hongxin was that Hongxin was logging in Burma under the pretext once the largest company in Nabang, followed by the of setting up a rubber plantation. According to a local Manying Company, which also had a large timber man, Hongxin had 2,500 workers in Burma’s forests in storage site on the outskirts of town.151 At its height, January 2007. He claimed that, “the real purpose of Hongxin had about 4,000 employees, 200 extraction the company is not for rubber tree plantation, but vehicles in Burma's forests, 60 cranes operating at for tree cutting. They cut trees to harvest logs and storage sites on the China side, 1,000 timber trucks store them on roads waiting for the border to open. and, “countless mountain forests in Burma”. On 3 The rubber tree plantation will take a long time to May 2006, the company is rumoured to have paid out finish. True for logs and false for rubber 20 million yuan (US$2.6 million) to its loggers.151 A few plantation.”329 days later Global Witness researchers saw more than Global Witness visited the Hongxin Company again 15 timber trucks, mostly belonging to Hongxin, during in March 2009 following rumours that the company had the 100 kilometre drive from Nabang to Yingjiang stopped trading timber completely. Only a few well- weathered logs could be seen at its storage site in Nabang. In fact the entire town seemed to be in terminal decline. One bus driver told Global Witness researchers that he was driving less than one fifth of the time that he had been only last year. Hotels were all but empty and the floating population had dispersed. A sign at the national border post read, “It is illegal to cross the border for logging and gold washing.” However, the global economic downturn, and perhaps a lack of trees, may also have played a part.137 Hongxin; April 2007

39 A DISHARMONIOUS TRADE Part A: Global Witness Research and Investigations in China 2006-09 / 7 Decline in the Illegal Timber Trade on the China-Burma Border

7.2.4 Kunming Most of the larger Chinese companies have direct transportation routes from the border to buyers and “It does not matter if the timber is imported legally or wholesale markets on the eastern Chinese seaboard. illegally, as long as the market accepts it.” Sales department Smaller and medium-sized companies generally manager of timber processing factory, Ruili, Dehong Prefecture, operate from the Kunming Xinan Timber and April 2006 Forestry Trading Market. The Xinan market is the largest timber market in Yunnan Province and deals The decline in the supply of Burmese timber since mainly in timber products from Burma. It has around March 2006 has had a noticeable impact further 190 stallholders and spans an area of approximately along the market chain in Kunming. This resulted in 18,000 m2. Most of the timber sold here is destined for a price increase of about 30% by mid-2006. The Guangdong and Shanghai. annual price increase was 30-40% for selected and high value timber, 20% for timber of mid range quality and 15% for lower value and more common timber. In early 2007, the average price of timber in the market had increased by an estimated 20% over the previous year, according to timber traders. The price of some species such as chempakad7 and teak had seen more dramatic increases. Chempaka for example had gone up from 2,000 yuan (US$260) to 4,800 yuan (US$624) per m3 in a year, while teak priced at 11,000 -13,000 yuan per m3 (US$1,430 - 1,690) in mid-2006 had risen to 18,000 yuan per m3 (US$2,340) half a year later.147 By 2009, teak prices at the border had fallen to around 11,000 yuan (US$1,618) per ton.145 Kunming Xinan Timber and Forestry Trading Market; December 2006d8

Xinan Market; February 2007 d7 This is the ASEAN standard name for the timber of the family Magnoliaceae. d8 According to the sign, timber tree species from Burma available in December 2006 included hongmu, kelongmu, xiangzhang and youmu.

A DISHARMONIOUS TRADE 40 Part A: Global Witness Research and Investigations in China 2006-09 / 7 Decline in the Illegal Timber Trade on the China-Burma Border

Global Witness visited the Xinan Timber Market than logs. However, the amount and the number of three times during 2006-07 and inspected more than species had declined, leading some outlets to shut up 30 companies with outlets at the market.146 Among shop and others to announce that popular species, the most sought after species were birch (Betula such as Chinese hemlock, were either in short supply spp.), chempaka (Manglietia spp.), keruing or sold out. Traders complained that business was (Dipterocarpus spp.), ramin,d9 Shorea spp., teak not as good as before when, “timber was easy (Tectona grandis), and Chinese hemlock (Tsuga spp.). coming, easy going and with big profits”. They Timber from Burma was still available at the market referred to the moratorium placed on the timber at the time of Global Witness’ visits. The vast imports from Burma in 2006 as the reason for the majority of the timber was sold as sawn wood, rather decline in supply.147 By 2007, some traders had, without great success, begun to look towards Laos and as alternative suppliers for high-value species.148 A timber trader from Pian Ma explained, “My stall here at the [Xinan] market is without timber. Pian Ma has been closed since the end of last year [2006] with a small amount of timber smuggled in. I have chased every border pass down to Laos and Xishuangbanna, with money wasted on trips and no gain. Gudeng near Liuku still has some timber, but the price is higher and the amount is small, so it cannot meet the market demand.”149 In February 2009, a local researcher reported seeing only two heavily loaded log trucks in eleven hours on the road from Ruili to Kunming. Xinan Market; June 2006

Xinan Market; June 2006 d9 The Royal Botanic Gardens, Kew, describes ramin as “[…] the common trade name given to a number of light coloured tropical hardwood tree species” of the Gonystylus genus. These species are, “native to the peat swamp forests of Brunei Darussalam, Fiji, Indonesia (Kalimantan and Sumatra), Malaysia (Peninsular Malaysia, Sabah, Sarawak), Singapore, Solomon Islands and The Philippines”. Ramin has been listed by Indonesia under CITES Appendix III. Malaysia is the only country to have made a ‘reservation’ and is therefore not bound by the provisions of CITES with respect to the controlled trade in ramin as other parties to the convention, such as China, are. For further information on how CITES works please see: http://www.cites.org/eng/disc/how.shtml

41 A DISHARMONIOUS TRADE Part A: Global Witness Research and Investigations in China 2006-09 / 7 Decline in the Illegal Timber Trade on the China-Burma Border

7.2.5 The economic importance of the timber trade realised by the and lobbying to reopen the border investors in processing plants The importance of the timber trade to the income on the eastern revenue of local prefectures along the China-Burma seaboard. border should not be overlooked. In addition to Some timber providing employment, the timber import industry traders have provides tax revenue to the local prefectures. made significant According to a report from the local bureau of the investments in Ministry of Commerce, Tengchong County received tracts of forests, 78.5 million yuan (US$10.2 million) in taxes from roads, and border trade in the first half of 2005, the majority bridges to the from taxing timber imports.121 In 2005, more than logging sites, 50% of the financial revenue for County, in which they need Dehong Prefecture, was from Pian Ma.150 As much to recoup. For as 80% of Yingjiang County’s income might be from their part, local Department of Commerce (Lushui County) timber imported into Nabang.151 officials have notice announcing the temporary suspension of it issuing documentation necessary for However, a failure on the part of the local tried to ensure timber exportation (dated 30 December 2006) authorities to diversify has resulted in an over- that the trade reliance on natural resource extraction for revenue continues, in generation. This over-reliance on imports has left the the face of the official moratorium and new rules local economy very sensitive to any changes in imposed by the Yunnan provincial government timber import volumes and unprepared for long- under the direction of the central government. term sustainable growth, particularly when the Since the suspension of the timber trade, in forests of northern Burma are exhausted. March 2006, and the publication of the Interim To make matters worse, little of this money has Measures, many businessmen and local officials have been invested in improving the livelihoods of local pleaded with the provincial authorities, the central people (see ‘A Choice for China’ and reports by Chinese government, and the Burmese government Forest Trends).152, 153 Most of the people investing to resume the trade. They cited financial difficulties and employed in the trade are migrants from other and the need to, “recover old timber stuck by the parts of China. In addition, much of the profit is border”.154, 155, 156

Road building, Guyong; January 2007

A DISHARMONIOUS TRADE 42 Part A: Global Witness Research and Investigations in China 2006-09 / 7 Decline in the Illegal Timber Trade on the China-Burma Border

Requests to collect and/or import ‘old logs’ have and officials from Lushui County (which covers Pian been used throughout the region, and no doubt Ma), Nujiang Prefecture, also visited Rangoon in beyond, as a pretext for renewed cutting; i.e. the logs 2006. They complained that their contracts with the in question do not in fact exist at the time the armed ethnic opposition groups had been request is made. (For more information on ‘old logs’ invalidated. According to one source, “They tried to see, ‘A Conflict of Interests,’ pages 69-70.) explain that a lot of money had been lost and that Undoubtedly, there were some genuine ‘old logs’ in they wanted the Burmese government to consider this instance, there usually are, however fresh logs their contracts as legal and as a normal business trade. were also cut. In addition, many companies So far nobody has heard any news from them.”160 imported timber in excess of the allowed quotas fuelling another cycle of logging in northern Burma 7.2.6 Re-opening the China-Burma border for the and leading to subsequent crackdowns by Chinese timber trade enforcement agencies.108, 157 According to one trader spoken to by Global In July-August 2006, the border was reopened. Witness, “Governments at prefecture and county The Yunnan provincial authorities allocated large level, such as Dehong and its counties, went to Beijing import quotas of timber to companies based in many times to tell the central government that it Nujiang Prefecture (predominantly to Pian Ma), must take the border situation into consideration. Baoshan Prefecture and in Dehong Prefecture (to With the economy in decline and the potential for areas near Yingjiang but notably not to Ruili). In social instability they argued that the border should late July 2006, Global Witness wrote to the central be opened for timber trade. In doing this, they and provincial offices of the four government gathered information from companies and applied for agencies overseeing the trade to express concern that a quota, of 100,000 m3 of timber from Burma, to the this practice would undermine the positive steps Yunnan provincial government.”158 Other traders made towards halting the illicit trade. We did not working in the area have verified this account.159 receive a response. In late 2006, several hundred traders held Quotas were allocated to the prefectures following meetings in Ruili to discuss the border closure and surveys undertaken by the local departments of the the impact on the timber trade. Similarly, Zhangfeng Ministry of Commerce, which again were responsible traders formed a 15-person delegation that visited for the distribution of quotas to individual companies in Rangoon to lobby the Burmese government and the towns concerned. Quotas were reportedly based on encourage them to legitimise the trade with the the company’s financial situation and business Kachin armed ethnic opposition groups.156 Traders reputation.161, 162, 163

BOX 4: INCREASES IN THE PRICE OF TIMBER

“The further the forests, the better the species and the higher the quality. The high quality timber is mainly found in Dehong Prefecture, then Baoshan and finally Nujiang Prefecture.” Wooden hammer handle maker from Tengchong, May 2006

Prices for timber have increased throughout the border area because of the decrease in supply. In most places prices increased by between 30 and 50% in 2006 compared to 2005. For certain species the price doubled. This led some companies to abandon extraction of all but high value species.325

LIST OF LOG PRICES IN DEHONG PREFECTURE Chinese name Scientific name Common name May 2005 price yuan/m3 May 2006 price yuan/m3 Doufuzha Brassaiopsis spp. 1,300-1,500 1,700-1,800 Heixinmulian Magnolia baillonii Chempaka 2,000-2,300 4,000-4,500 Huangxinnan Phoebe puwenensis Tembesu /Ironwood 1,300-1,500 2,000-2,200 Huangyunxiang Cantleya corniculata 1,800-2,000 2,500-2,800 Jidanhuang Pentace burmaica 1,400 1,700-1,800 Kelongmu Dipterocarpus turbinatus Keruing 1,400-1,600 2,000 Suanzhimu Dalbergia oliveri Palisander/Tamalan 6,000 8,000-12,000 Xinanhua Betula alnoides Birch 1,300-1,500 2,000-3,000 Youmu Tectona grandis Teak 6,000 8,000-1,0000 Zitan Pterocarpus macrocarpus Burma Padauk 60,000-70,000 75,000-120,000

43 A DISHARMONIOUS TRADE Part A: Global Witness Research and Investigations in China 2006-09 / 7 Decline in the Illegal Timber Trade on the China-Burma Border

bosses, who sought to gain sudden huge profits, ignored “[…] in consideration of the heavy losses experienced the weight capacity of the road forcefully overloading by most timber companies in the border areas, the 167 Yunnan government released a certain amount of their timber trucks […]” This coincided with the rainy quotas in July 2006 to each prefecture … to make season and as a result the main road was badly damaged timber that had already been cut down and moved to at an estimated cost of 2.52 million yuan the border areas before March 2006 legal in China. (US$327,600).167 Parts of the road were still in disrepair However, this announcement made some companies in April 2007.168, 169, 170, 171, 172 think that they would have a second chance to get more timber from Burma by cutting and transferring Timber traders have reported several other incidents them into China. Therefore cutting did not really stop where customs officials and other local agencies have in the Burmese forest, though the scale is not bigger reopened the border for a short period of time, despite than before. Upon realising that the situation was official policy, and have processed documents for limited made even worse, the Yunnan government recently amounts of timber. These businessmen have described announced that no piece of timber could be moved out the same situation in a variety of ways: of border towns. Some companies with strong financial power and good relationships with Burmese business partners, and the Chinese border checkpoints, have • “The border is often ‘closed’ and ‘open’ because of the found other ways to avoid the checkpoints and have mixed situation.”173 continued to cut and transport Burmese timber into the • “The border opened and closed and reopened Chinese side of the border. They hope that new quotas again.”161 will be allocated again. Therefore the current situation is repeating itself, and the Yunnan government has • “It [the border] was opened temporarily for half a 174 ordered the movement of any timber without month.” exception to seriously stop.” Interview with government • “The customs in Dian Tan and all the border ports in official, Baoshan Prefecture, Yunnan Province, 2007 Tengchong are officially closed; but there’s a big policy and a small one. Occasionally, the customs reopen for a short period dealing with timber The total quota allocated to companies in Pian Ma, procedures for 30 companies at a time.”175 which could be imported from 16 July 2006, was 30,000 m3. However, it was exceeded by, “a large amount”, During Global Witness visits to Yingjiang and according to one government official in the area,162 and by nearby towns in April 2007, timber imported into 20,000 m3 according to an informed local timber trader. Nabang and Car Zan, and transported from there This prompted an investigation by customs officials from further inland, had reportedly just received neighbouring Baoshan Prefecture. According to officials transportation certificates. Large-scale smuggling was spoken to by Global Witness, “The provincial government also apparent.176, 177, 178, 179 This situation has fuelled got so angry about it that they gave repeated orders to stop hopes among traders and logging operators that business the timber trade.”162 As a result, no timber was allowed will soon return to normal. into Pian Ma after 28 December 2006. 161, 164, 165, 166 In July 2006, several Chinese towns received quotas for the importation of timber from Burma. Guyong was given a quota for 10,000 m3 of timber, Tse Tse, 30,000 m3, and Dian Tan several thousand cubic meters. It is not known if these quotas were also exceeded but according to a local official the ‘reopening’ led to continued logging in Burma. This led the provincial government to stop the movement of any timber in the border areas by late December 2006.163 In the Yingjiang area of Dehong Prefecture, local authorities applied for a quota of 100,000 m3 from the provincial government. Nabang was reportedly going to be allocated 50,000 m3, Car Zan 50,000 m3 and the small town of Hong Bom He 10,000 m3. Global Witness has not been able to verify these figures or to ascertain how much timber was subsequently imported. However, it is clear that the roads from these towns, including the nearby Sudien to Yingjiang road, were very busy with heavily loaded log trucks between July and August 2006. Forest Department of Yunnan Province notification of a new According to a local newspaper, “[…] the customs border trade timber transportation licensing system based annual quotas (issued on 25 December 2006 and coming into opened the port for timber transportation and timber effect on 10 January 2007)

A DISHARMONIOUS TRADE 44 Part A Global Witness Research and Investigations in China 2006-09 / 8 The Trade in Burmese Timber on China’s Eastern Seaboard

8 THE TRADE IN BURMESE TIMBER 8.1 Chinese market response to the crackdown ON CHINA’S EASTERN SEABOARD on illegal cross-border trade in Burmese timber – online and telephone surveys “In the smuggling business you need trust to do business.” Jiashan Longsen Lumbering Co., Ltd. representative, October 2006 A Global Witness survey of two leading wholesale timber markets in Shanghai, and Guangzhou in The majority of the high value timber imported from Guangdong Province, available online, shows that Burma to China ends up in the timber markets and the crackdown by the Yunnan authorities, on the wood processing factories on China's eastern illegal cross-border timber trade in 2006, had an seaboard. Companies in and around the greater immediate impact on both the availability and price Shanghai area and in Guangdong Province use this of Burmese timber. The overall supply of timber to timber to manufacture floorboards and furniture for these markets dropped by between 20 and 50% the domestic Chinese market and for export markets within weeks of the crackdown and prices in the U.S. and Europe. increased by 300-1,000 yuan (US$37-125) per m3. Following the imposition of the moratorium on Traders and market analysts all cited the recent cross-border timber imports from Burma, and, border measures as the main reason for the market subsequently, the Interim Measures, by the Yunnan changes.180 authorities, Global Witness surveyed market The online survey was followed in July 2006 by information available online in order to assess the telephone calls to four of China’s largest wholesale impact of the new restrictions. This research, a timber markets located in Shanghai and in telephone survey, and information gathered on a trip to the eastern seaboard, in September and October 2006, showed that a large amount of timber from northern Burma was available on the Chinese market. However, the supply was small and unreliable and prices had increased accordingly. As a result, manufacturers were increasingly looking to other countries for their timber. That said, some still had large stocks of Burmese timber, predominantly teak, and several companies (and/or their direct suppliers) were engaged in smuggling timber across the Burma-China border. Indeed, a few of the companies interviewed by Global Witness were ready to falsify documents in order to sell their stocks of Burmese teak. In general, none of these companies, including China’s two leading manufactures of wooden flooring, appeared to have adequate mechanisms in place to ensure that the wood they were buying from Burma was obtained from legal, let alone sustainable, sources. Western buyers were apparently not concerned about the legality and sustainability of timber used in their products.180, 181, 182 Shanghai Anxin Flooring Co., Ltd., promotional poster at company office, Shanghai, China; September 2006

45 A DISHARMONIOUS TRADE Part A Global Witness Research and Investigations in China 2006-09 / 8 The Trade in Burmese Timber on China’s Eastern Seaboard

Guangdong Province. Global Witness researchers 8.1.1 Shanghai wholesale timber markets contacted four markets, which provide outlets for hundreds of wholesale timber trading companies: the Shanghai is located on the east coast of China at the Furen Forest Products Wholesale Market in mouth of the Yangtze River. The city, the largest in Shanghai, the Houjie Xingye Timber and Plywood China in terms of population (over 20 million), has Market and Dongguan Jilong Timber Market in provincial level status. It is also the largest business Guangzhou, and the Yuzhu International Timber and financial centre on the Chinese mainland and Market in Guandong. Global Witness interviewed the location of numerous timber-processing both market managers and sales managers facilities. representing 25 companies. In April 2006, the amount of timber arriving on Timber from northern Burma was still available the Shanghai wholesale markets had fallen 20% at all the markets but the supply had dwindled and compared to the previous year. According to trade most of the stock was imported in 2005. The main information, the main reason, “[…] was that Burma timber species originating from Burma available at had enhanced the control of exports of its own the time were Acacia spp., birch (Betula spp.), teak resources and most Burmese border ports had been (Tectona grandis), and shuidonggua (Alnus closed […]”.184 The shortage of new timber supplies ferdinandi-coburgii). Traders had a mix of lumber, meant that the market was largely reliant on existing semi-lumber, sawn timber, logs and veneer from stocks of Burmese timber, which led to significant Burma. Twenty-five of the 29 people interviewed price increases. The price of teak increased by said that the volume of Burmese timber had between 500 and 800 yuan (US$62-100) per m3, declined during the first months of 2006. This Baimu (Brassaiopsis spp.) by between 500 and 600 decrease was estimated to be 30-60% in comparison (US$62-75) per m3, and Heixinmulian (Magnolia to the previous year. According to those baillonii) by 1,000 yuan (US$125) per m3 in interviewed, the trade had been complicated by the comparison to the same period in 2005. cross-border restrictions on timber imports. By May 2006, supplies of Burmese timber had Twenty-two of the interviewees directly related the fallen still further; a 50% decrease compared to May decline to the ‘customs ban’ at the China-Burma 2005. According to trade analysts, the border.183 As a result, some traders explained that shortfall was due to the border closure. “At they would have to give up dealing in Burmese present, the Burmese government is not only timber if the situation continued.181 enhancing the resource management of timber exports, but our government also supports the conservation effort of timber resources by the Burmese government.”185 Prices for Baimu (Brassaiopsis spp.), Jinshiyou (Manglietia spp.), and Xinanhua (Betula alnoides) fell slightly in May, from a high in April. Teak prices, however, remained high with additional price increases by up to 300-500 yuan (US$37-62) per m3 186 as traders increasingly turned to North Africa and other regions to maintain their timber supply.185 “Wéi?” Furen Forest Products Wholesale Market, Shanghai; September 2006

A DISHARMONIOUS TRADE 46 Part A Global Witness Research and Investigations in China 2006-09 / 8 The Trade in Burmese Timber on China’s Eastern Seaboard

8.1.2 Guandong Yuzhu International Timber Market teak. The market report also noted the lowest ever amount of timber supplied by rail from south-west “China represents global wood industry. Guandong China (i.e. Yunnan Province) in the preceding weeks: represents Chinese wood industry. Yuzhu represents less than 300 m3 of Xinanhua (Betula alnoides), Guandong wood industry.”187 Guandong Yuzhu International Jinsiyou (Manglietia spp.) and Kasila.189, 190 Timber Market, 2009 Timber supplies from Yunnan Province were still Guangzhou is located on the coast south of at a low level in June. According to one trade report, Shanghai, on the Pearl River, 120 kilometres north- “Burmese teak has arrived in low amounts, no matter west of Hong Kong. This city is the capital of if logs or panels, only a truck load of teak logs to the Guandong Province and the location of the market and no piece of teak panel in it. The stock of Guangdong Yuzhu International Timber Market, teak timber has decreased greatly in comparison with one of China’s largest timber wholesale markets. the same period last year. Based on this we can deeply According to its English language website, Yuzhu feel the great power of the Burmese border closure has won several awards including: ‘Star Market policy which has not only impacted the goods among National Wood Markets’ and ‘Civilise and structure of the log market but also changed people’s Honest Market in Guandong Province.’187 loving preference for Burmese teak in a silent Yuzhu, like Shanghai, reported a significant way.”191 Due to the lack of supply from Burma, via decline in supply of Burmese timber immediately Yunnan Province, a leading trade analyst after the imposition of new restrictions, resulting in recommended that manufacturers and traders higher prices. Log arrivals at the market were about prioritise timber from Russia instead.192 30% lower, in the first four months of 2006, Apparently, market representatives had compared to 2005. “Log markets dealing mainly with negotiated with the Burmese government via the timbers from Southeast Asia and Yunnan-Burmese Chinese authorities. “In future, the market will timbers has been impacted by timber export make a policy to ask the sellers to import Burmese restrictions of Southeast Asian states, […] and that the timber according the agreement signed between Burma border has been blocked since the end of China and Burma Governments. This means to March with timber border trade prohibited resulting import from the proper way.” According to the same in shortage of timber supply and increase in prices senior manager, “the policy is good but not easy to […]. It is expected that when Burma re-opens the apply”.13 The manager of the Songij Timber Co., border, timber kept as stock in the border areas will Ltd., the largest importer of Burmese timber in the greatly pour into China but ‘old hands’ has pointed Yuzhu Market, said that normally the company had out that a decline in the total amount of Burmese a stable supply via Yunnan Province, “but the timber imports this year will be a foregone situation is becoming unclear due to the political conclusion.”188 process between China and Burma”. The company In May 2006, the Yuzhu Timber Market reported was expecting renew its steady supply of timber continued shortfalls in supply and high prices of once the border reopened.193 A number of other “Yunnan and Burmese timbers”. This was traders were looking to alternative supply countries particularly the case for Baimu (Brassaiopsis spp.) and in Africa or Asia.

Zhejiang Chanx Wood Co., Ltd., drop-sided lorry; September 2006

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8.2 Chinese market response to the crackdown on illegal cross-border trade in Burmese timber – Global Witness field research

“Burma is a poor country. When you are that poor, you have to find a way to get rich. Selling your own resources is one of the few ways and you can always bribe some officials so that you can smuggle the wood out of the country. In the market, some of the hard wood that claim to be made in China, like Yunnan or north-east, actually comes from Burma.”194 Zhejiang Chanx Wood Co., Ltd. representative, September 2006

During September and October 2006, Global Witness looked at the availability of timber originating from Burma at Chinese flooring companies located on its east coast. Researchers visited three wholesale outlets and thirteen high street retail stores in Shanghai. Fourteen flooring manufacturers located predominantly in or near Shanghai, in the Province of Zhejiang south of Shanghai and Jiangsu Province to the north, and in Guangdong Province were also visited. The three wholesale outlets, situated in the Furen Forest Products Wholesale Market in Shanghai, all reported similar information i.e. that supply was limited and unstable, prices were increasing and that Zhejiang Fangyuan Wood Co., Ltd., Xylia sp. flooring; September 2006 the traders increasingly sourced timber from Africa where they do not face similar problems.195 regular and prices had increased by about 30% since Almost all of the companies visited by Global the border closure in March 2006. However, the Witness were established in the early to mid 1990s and companies could still supply wood products made of most were undergoing rapid expansion during the wood species from Burma by using stock-piled research period. Some had doubled their output over a timber, by obtaining continued supplies across the one to three year period. Most of the companies were border through good contacts or smuggling it in owned privately by Chinese individuals. Taiwanese illegally (which often amounted to the same thing) nationals owned two of the businesses, and another a and/or by buying timber through official channels via joint venture with an American company. Companies Rangoon. Several companies admitted to an visited included some of China's leading flooring involvement in smuggling timber across the Burma- manufacturers, for example Shanghai New Sihe Wood China border. While a few companies bought the raw Co., Ltd., the largest manufacturer of engineered material at the wholesale markets in Shanghai and flooring, and Shanghai Anxin Flooring Co., Ltd., the Guangdong Province, and four reported that they largest manufacturer of solid wood flooring in China. sourced all or at least some of their Burmese timber The companies generally had between 100 and 700 through official channels in Rangoon, most had staff and a monthly output capacity ranging from connections along the Burma-China border. All 30,000 m2 to 500,000 m2 of wood flooring. Between 40 companies were aware that the reason for the and 100% of production was for export. unsteady supply was the border restrictions imposed Global Witness’ research uncovered widespread by the Chinese and Burmese authorities. use of teak from Burma in the manufacture of The companies dealt predominantly in solid and flooring along with other high value species such as engineered wood flooring (thin layers of wood glued black walnut,e1 pyinkado (Xylia dolabriformis) and and pressed together). Only the top layer of Mangletia spp. All but one of the fourteen companies engineered flooring, marketed as teak, will actually visited by Global Witness said that it was still be made of teak. Both solid and engineered flooring possible for them to obtain timber from Burma across was available in various sizes. The flooring was being the land border despite the import restrictions. sold both domestically and on the international According to these companies the supply was less market, predominantly to the U.S. but also to e1 This should not be confused with the black walnut native to north America (Juglans nigra), which is also by used be Chinese flooring companies. These companies variously list it as Acacia spp. or Dracontomelon spp. (also the PNG walnut). It is not clear which, if either, Latin name is correct.

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Europe.182 According to the Carlyle Group,e2 8.2.1 Chinese flooring manufacturers dealing in investors in Shanghai Anxin Flooring Co., Ltd. Burmese timber (Anxin), “China’s largest manufacturer and distributor of solid wood flooring”, engineered wood 8.2.1.1 Shanghai Detangu Wood Co., Ltd. floors, “are more environmentally friendly than the “But as everything else in China, there’s always a way.”201 high-end solid wood floors usually made of rare Charles Pan, manager of Flooring Yao Enterprise Co., Ltd., 196 hardwood from trees of more than 60 years old”. September 2006 All but one of the 14 companies visited by Global Witness were able to offer wooden flooring made out The flooring manufacturer Shanghai Detangu Wood, of wood, mostly teak, from Burma. Two of the which is located on the outskirts of Shanghai, has companies visited mainly produced decking for ships over 100 employees and a monthly output of five and for gardens.e3 containers of which 40% is for the domestic market In addition to the companies profiled below, the and 60% for the international market. Teak along following companies both reported that they could with black walnut is sourced from Burma and mainly still get timber from Burma via Yunnan Province: exported to England, Japan and America. Jiashan On-line Lumber Co., Ltd. and Changzhou Its main investor Charles Pan, manager of the Nanyang Wood Products Co., Ltd.197 Taiwanese company Flooring Yao Enterprise Co., The Shanghai Yiming Wooden Industry Co., Ltd., explained the following to Global Witness Ltd., part of the Huaming Group, told Global during a visit to Shanghai Detangu Wood when six Witness that it bought its Burmese teak supply at of its senior staff were present: “Yes, there has been wholesale markets in Shanghai insisting that it was problems with the supply [of wood from Burma] sourced through legal channels. However, the sales because the Burma government imposed a ban on manager admitted that he was not sure through illegal logging and the Chinese government sealed which route the timber had been imported and the off the border. But as everything else in China, company had no system of verifying the legal origin there’s always a way. Other factories may have of its timber nor did it check or require any problems, but we are fine. […] We purchase teak certificates from the suppliers to this effect. When and black walnut in Kunming – it comes from questioned further the company sales representative Burma of course. It can reach Shanghai in five days said that he was, “not sure about these things”.198 once the purchase has been made. […] The border Companies complained about the decline in the with Burma is sealed off for the moment, and we quality of teak for sale at the official timber auctions have to play ‘guerrilla war’ with the authorities and in Rangoon, apparently due to over-harvesting, but smuggle the timber out of Burma. […] I have been stressed that this supply was now more reliable than to the border, of course. Burma and China are only cross-border trade following the imposition of the divided by a thin river so you can see each other restrictions.199 The following manufacturers reported that they partly or fully sourced their timber from Burma through official and legal channels i.e. via Rangoon: Changzhou Nanyang Wood Products Co., Ltd., Farstar Trading Co., Ltd., Shanghai Anxin Flooring Co., Ltd., Jiashan Longsen Lumbering Co., Ltd., and Fertility Forest Woodwork Factory Co., Ltd.200 Few of the companies were willing or able to provide documentation certifying that the timber was from legal or sustainably managed sources. Apparently, it was very rare for international buyers to inquire about or let alone require such documentation. However, two companies were willing to supply fake documents.198, 204 It is possible that the business practices of these Chinese companies have improved in the intervening years. Shanghai Detangu Wood Co., Ltd., Burma cherry flooring; September 2006 e2 “The Carlyle Group is one of the world’s largest private equity firms, with more than $85.5 billion under management.” For further information see: http://www.carlyle.com/Company/item1676.html e3 Companies told Global Witness that the following species, available on the Chinese market, originated in Burma: birch (Betula spp.), black walnut, Burma rosewood, caslin (also referred to as kokko (Albizia lebbek)), golden teak, kesambi (Schleichera Oleosa), mahogany, Mangletia spp., padauk (Pterocarpus macrocarpus), pyinkado (Xylia dolabriformis), red birch (or cherry), samak, and teak (Tectona grandis).

49 A DISHARMONIOUS TRADE Part A Global Witness Research and Investigations in China 2006-09 / 8 The Trade in Burmese Timber on China’s Eastern Seaboard clearly across the river. On the bank at the China 8.2.1.2 Jiangsu Zhangjiagang Yongan Building side, you often see some little timber processing Materials Co., Ltd. factories popping up from time to time, sawing logs “If you strictly follow the rule, then you’ll never get that have been transported secretly across the river. anything.”202 Jiangsu Zhangjiagang Yongan Building Materials Co., Then they disappear when the government cracks Ltd. representative, October 2006 down. […] My company will not have a problem with supply – we have good connections. But we will The Jiangsu Zhangjiagang Yongan Building Materials also try and get teak from official channels. But it Co., Ltd. is located in Jiangsu Province near takes so much longer to get officially obtained logs Shanghai. The company is family-owned and was and often the good quality ones are bought by established ten years ago. Its monthly output was companies from Thailand and Malaysia who have 70,000 m2 but this was due to increase to 120,000 m2 good connections with the Burma authorities […] when its new factory opened in November 2006. We do need teak. The rich people from America and The company’s sales representative reported that Israel and other places need teak to decorate their they had had some difficulties in obtaining teak decks. It won’t be a problem for me. I’ve been in the across the Burma-China border and that the price trade for 18 years. I have my little ways.” Shanghai has increased substantially, “because the Burmese Detangu Wood hoped to be among one of four want to protect their own species”.202 However, companies that were soon to be approved by the golden teak, which was described as a kind of Burmese authorities to export logs across the walnut, was readily available. The company had Burma-China border.201 apparently imported 600 containers of golden teak in 2005. Teak (Tectona grandis) was also available on demand.202 “We have no problem with getting the golden teak from Burma as it is not embargoed at all. The price on the ‘golden teak’ is stable where as the real teak has gone up. […] We can though get real teak if you order it. […] It should not be a problem getting smaller quantities such as 1-2 containers […] We get the golden teak directly from Burma where we cooporate with some factories inside Burma. We mainly get it via land as sawn timber from our suppliers in Burma.”202 Despite first claiming that all its supplies were imported legally the company representative later admitted to Global Witness that this might not always be the case. “Burma is a dodgy country with so little transparency. It is so hard to tell which method is legal and which is not. For us, it is important to get some supply. If you strictly follow the rule, then you’ll never get anything. Yes, the border is sealed, but golden teak is not that tightly controlled. And some people are specifically engaged in this sort of business. And we get our supply through them. Stable supply.”202 Jiangsu Zhangjiagang Yongan Building Materials Co., Ltd., factory; October 2006

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8.2.1.3 Jiashan Longsen Lumbering Co., Ltd. Earlier in the conversation, the sales representatives claimed that all the Burmese timber “We Chinese are very resourceful. We are the best at the company had sourced after the ban now arrived 7 finding holes.” Jiashan Longsen Lumbering Co., Ltd. by sea. However, they later admitted that they had a representative, October 2006 mix of timber some from across the land border and some official imports via Rangoon. Some timber had During Global Witness’ visit to the Jiashan to be smuggled overland in order to keep costs Longsen factory, in Zhejiang Province near down. Timber imported officially via sea from Shanghai, a truck with teak from Burma arrived at Rangoon was more expensive. the company compound and parked under a huge During the factory visit Global Witness billboard featuring Deng Xiaoping, 5th General investigators observed large amounts of teak flooring Secretary of the Communist Party of China. One and veneer. The company representatives claimed that a of the two sales representatives Global Witness relative of the company’s owner, who was responsible researchers were speaking to at the time for ensuring supply, was based in Burma. He has good commented, “See, we got this overland. Smuggled connections with the local teak dealers: “In the in of course. Tell your colleague that we can smuggling business you need trust to do business.”7 guarantee the supply. We Chinese are very resourceful. We are the best at finding holes. 8.2.1.4 Guangzhou Li Heng Timber Otherwise, how can we continue to do the Manufacturing Co., Ltd. (Bijia Flooring) business?”7 Such and approach to business would appear to be odds with the ‘company culture’, as “Our target is environmental protection.” Li Heng company set out in its 2006 brochure, which includes brochure, 2006 ‘honesty’ under ‘corporation spirit’. The company, which had 320 workers and an The Li Heng Group, located in Guangzhou in Guangdong Province, was rapidly expanding at the annual output of about 60,000 m2 of engineered and time of Global Witness’ visit. Its new factory had solid flooring, had been affected by the border just increased the company’s monthly output from restrictions. Supply was now less certain and prices 70-80,000 m2 2 had gone up by 30% during the previous 6 months. to 120,000 m of flooring, of which 30- However, the company representatives were keen to 40% was for export. As was the case with several stress that it could still meet customer demand. If other companies, it was increasingly changing production to engineered boards due to the interested, the company could deliver 4,000-5,000 m2 increased price of raw materials (for engineered of teak flooring within 40-45 days. boards a smaller percentage of the wood, only the top layer, must be of high value wood in comparison to solid boards.)203 Li Heng managers claimed that despite supply problems the company could still source Burmese timber from its suppliers in Yunnan Province because, “The border isn’t sealed off completely. It is open up from time to time and certain amount of timber always comes out.”203 Jiashan Longsen Lumbering Co., Ltd.; October 2006

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8.2.1.5 Shanghai Anxin Flooring Co., Ltd. expanding their access to the global market.”208 Anxin was also pleased, “FSC certificate helps Anxin into “Anxin calls on all the people to love our forest and protect more markets where people loves forest and pays our environment, so as to make our planet more 205 beautiful.”205 Anxin Flooring, 28 March 2006 special attention to environment protection.” Anxin is currently, “the largest solid wood floor manufacturer in China”, and one of Carlyle Asia ‘Growth Partners’.209 Carlyle invested 230 million yuan (US$27.5 million) in Anxin in May 2006.e5 At the time of Global Witness’ investigation in September 2006 Anxin had 1,800 employees,e6 an annual output of around 3.5 million m2 of flooring comprising 50 species (in 2005), and 1 million m2 of storage space (which was full). The company representatives stressed repeatedly to Global Witness researchers that Anxin’s Burmese teak was sourced from legal sources. However, on a private note one added, “I don’t exactly know how we get the teak – I am not in charge of buying. We don’t log or smuggle any teak out of Burma. As for how the suppliers get teak, I don’t really care. If we have an Lu Wei Guang Anxin’s founder and CEO meets former U.S. President order, we need to get it.”12 (and former Carlyle adviser) George H. W. Bush At the time of writing there is no sign of Burmese Shanghai Anxin Flooring Co., Ltd. is a global player teak on the Anxin website. It is not clear where the in the wood flooring industry and the first Chinese teak, if any, in TT01A flooring from the Korea member of the National Wood Flooring Association Collection comes from and the Mandalay Teak, also based in north America.206 In 2004, Shanghai Anxin in the Korea Collection (LP-07-A), is not made of 210 Flooring Co., Ltd. acquired a large natural forest in wood. Despite this, however, according to one Brazil, “becoming the first Chinese company to own company representative, who emailed Global forestry resources abroad”. In August 2005, Anxin Witness in May 2009, Anxin can still, “do the obtained 40,000 m2 of land on the China-Russia Myanmar teak flooring”. Apparently, “at present”, border to build a wood processing . Later that Anxin is exporting, “this species wood flooring to 211 year, on 31 October, Anxin became one of the USA and Korea”. first official members of the China Forest and Trade Network (CFTN).207 By 2006, Anxin accounted for more than 50% of Brazil’s timber exports to China for use in the manufacture of flooring.196 Anxin received a certificate from the Forest Stewardship Council (FSC) in March 2006, awarded, according to the Carlyle Group, one of its major investors, “in recognition of its forestry protection efforts for sustainable development”. Anxin had actually been awarded Chain of Custody (CoC)e4 Certification (Certificate Code: SGS-COC-2532 - A & W (Shanghai) Woods). The World Wide Fund For Nature (WWF) and the CFTN said at the time: “The company is serving as a guiding light for other Chinese wood product companies which seek to ‘do the right thing’ for the environment while at the same time Anxin board member Ms Jie Chen meets Wen Jiabao, Premier of the People’s Republic of China e4 “FSC chain of custody CoC certification provides information about where the wood or other forest-based material used in a product comes from or does not come from. It requires [holders] to identify the origin of raw materials used in FSC-certified products, to keep FSC-certified products separate from other products throughout the production process, and to allow their tracking from one operation to the next - from the forest to the consumer, including all successive stages of processing, transformation, manufacturing and distribution.” For further information on the FSC please see: http://www.fsc.org/about-fsc.html e5 The Private Equity Council, which includes the Carlyle Group among its members, announced the adoption of ‘Guidelines for Responsible Investment’ on 10 February 2009. For further information please see: http://www.carlyle.com/Company/item10631.pdf e6 1,400 employees were based in Shanghai, 100 at a factory on the China-Russian border and 300 workers at two factories in Brazil.

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